Economics: An Introduction.

Transcription

1 Economics: An Introduction.

2 What is Economics? The study of CHOICES And the study of how individuals and nations use scarce resources to satisfy their needs and wants.

3 Why is This Class Necessary? This is Warren Sapp. He made over $60 million during his career He owed child support to five different women Owned 240 pairs of Air Jordans Had run up $6.7 million in debt And had $1,165,35 in his checking account When he declared bankruptcy in Your future prosperity does not depend on your INCOME. It depends on your ability to make GOOD DECISIONS. That is the point of this class.

4 Standard: SSEF1A Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.

5 There is No Such Thing as a Free Lunch Resources are limited, but human wants and needs are UNLIMITED This is called SCARCITY Scarcity ALWAYS exists. Because of scarcity, EVERYTHING you do has a cost Even if that action seems to be free What might be a cost of taking a walk in the park?

6 Standard: SSEF2C Explain that people, businesses, and governments respond to positive and negative incentives in predictable ways.

7 Incentives: The Key to Economics Incentive: the hope for a reward or the fear of a punishment. Positive incentives Negative incentives. A positive incentive is a REWARD And a negative incentive is a PUNISHMENT People react to incentives in predictable ways.

8 Standard: SSEF1D Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.

9 Because of scarcity, everybody is forced to make trade-offs The sacrifice of one thing in order to have another. The cost of the trade-off is called the opportunity cost The value of the SECOND BEST option you did not take. This Sunday you might choose between church, sleep, visiting family, doing homework, working You narrow it down to visiting your grandmother and SLEEP And you go back to sleep. What was your opportunity cost? Visiting your grandmother. Was that a good choice? Maybe maybe not. Opportunity Cost What trade-off is being made in this picture?

10 You have enough money to buy either a Playstation 4 or an Xbox One. You Choose the PS4. What is the opportunity cost? A.PS4 B.X Box One

11 Standard: SSEPF6B Explore job and career options and explain the significance of investment in education, training, and skill development as it relates to future earnings.

12 Why Are You Here? You could be working RIGHT NOW!!! But right now, you are making NO MONEY AT ALL!!! Minimum wage is now $7.25 but you might even get a job RIGHT NOW for more than that!!! Let s say, $10 an hour $10 an hour, 8 hours per day, $80 bucks a day, $400 bucks a week This semester lasts for 18 weeks What is your opportunity cost for choosing to stay in school?

13 $7,200

14 But Wait! High school dropouts earn, on average, $910,000 in their lifetime Graduates earn $1.2 million So, the opportunity cost of dropping out is $290,000. And those with four-year degrees earn $2.1 million So the opportunity cost of not going to college is $900,000. Those with master s degrees earn $2.5 million And those with professional degrees earn $4.4 million.

15 Standard: SSEF6D Analyze, by means of a production possibilities curve: trade-offs, opportunity cost, growth, and efficiency.

16 Production Possibilities Curves Any point inside of the curve represents inefficiency (you have resources left over). Any point outside of the curve represents an impossibility (unattainable). PPCs show us that resources are scarce and there is always an opportunity cost.

17 Production Possibilities Curves

18 Standard: SSEF1B Define and give examples of productive resources (i.e. factors of production): natural resources (i.e. land), human resources (i.e. labor and human capital),physical capital, and entrepreneurship.

19 Factors of Production or Productive Resources Factors of Production the resources that are used to make all goods and services. There are three: 1. Land natural resources used to produce goods and services (coal, water, lumber) 2. Labor the effort a person devotes to a task (human resource). 3. Capital any human made resource that is used to produce other goods and services. There are two types of capital: Physical Capital, and Human Capital.

20 Types of Capital Physical Capital Human-made objects that are used to create other goods and services Such as tools, factories what else? Human Capital (human resource) the knowledge and skills a worker gains through education and experience. The economy must have both types of capital to grow.

21 Putting the Factors Together: Entrepreneurs ambitious leaders who combine land, labor and capital to create and market new goods and services. They develop new ideas, start businesses, create new industries and are critical for economic growth to occur.

22 Standard: SSEF1C Explain the motivations that influence entrepreneurs to take risks (e.g. profit, job creation, innovation, and improving society).

23 Motivations of Entrepreneurs Profit Motive: Make Money Provide Jobs Innovation: Inventing new items that make life easier. Improve Society