Scarcity and Opportunity Cost

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Scarcity and Opportunity Cost

• Phinizy/Staker

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ECONOMICS

• Economics the study of how people use scarce
  resources to satisfy unlimited wants
• Microeconomics study of behavior and decision
  making by small units such as individuals and
  firms.
• Macroeconomics study of the economy as a whole
  and decision making by large units such as
  governments and unions.

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SCARCITY

• SCARCITY society doesnt have enough resources
  to produce all the things people would like to
  have.
• It is the fundamental economic problem

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TRADE-OFFS OPPORTUNITY COST

• Trade-offs other choices you could have made
  when you spend your or time.
• What are you giving up when you make a choice?
• Opportunity Cost the most desirable alternative
  given up when making a decision
• Opportunity cost is the cost (VALUE) of the next
  best trade-off

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Would you rather

• Sleep late or go on a Caribbean cruise?
• Sleep late or go to the mall with friends?
• Sleep late or study for a test?
• Whatever you chose depended on the opportunity
  cost of the alternativewhat you were willing to
  sacrifice.

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OPPORTUNITY COST

• Time spent, convenience also has an opportunity
  cost.

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OPPORTUNITY COST

• Mr. Petty owns a small shoe store but has NO
  employees. On an average day he takes in 200 in
  sales, and thats about what he expects to make
  this Friday. Mr. Petty is offered an opportunity
  to go on a day-long competition on a local radio
  show on Friday. If he goes on the show he will
  have to close his shop, and will lose any sales
  he would have made for the day. At the radio
  show, he will compete against 100 other
  listeners, and the winner will receive 10,000.
  The game is based entirely on luck, so each of
  the 100 listeners has an equal opportunity of
  winning.

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OPPORTUNITY COST

• If he goes on the show, what is Mr. Pettys
  opportunity cost?
• Do you think he should go on the radio show? Why
  or why not?

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3 Basic Economic Questions

• WHAT to produce?
• HOW to produce?
• FOR WHOM to produce?
• Society must answer these 3 questions as long
  as there arent enough resources to satisfy the
  problem of scarcity

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3 Basic Economic Questions

• Apple Computers to Begin Manufacturing Computers
  Made Specifically for Elementary Children
• Powerade Will Be Sold in All High Schools Next
  Year.

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3 Basic Economic Questions

• China Will Focus on Increasing Rice Production
  in 2007
• DVD Players Will Now Be Manufactured Entirely by
  Robots

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3 Basic Economic Questions

• United States Hopes to Become the World Leader
  in Potato Production
• Henry Ford Revolutionizes Automobile Production
  by Using an Assembly Line

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Review Activity

• Write 3 newspaper headlines on your own one for
  each of the 3 Basic Economic Questions.
• You will share one of them with the class and the
  class will guess which question your headline is
  addressing.

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4 Factors of Production (C-E-L-L)

• LAND gifts of nature, not created by human
  effort
• CAPITAL tools, equipment and factories used to
  produce goods and services.
• LABOR people with all their efforts, abilities
  and skills
• ENTREPRENEURS people who take risks in search of
  profit they start new businesses or bring new
  products to market.

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Create your own business

• Imagine that you are an entreprenuer starting
  your own business.
• First, what kind of business would it be? (What
  good or service are you providing?)
• Be sure to give AT LEAST three aspects of LAND, 3
  aspects of LABOR, and 8 aspects of CAPITAL needed
  to successfully run and manage your business.

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4 FACTORS OF PRODUCTION ILLUSTRATION ASSIGNMENT

• Create an illustration about the 4 factors of
  production. The illustrations must be COLORED and
  should include
• A label of each of the 4 factors
• A short description/definition of each factor
• Pictures with at least 3 items representing each
  of the 4 factors. (3 pictures for capital, 3 for
  labor, 3 for land, etc.)