Time Space Money. Reminder to turn homework in to top tray. If you did not do it, or did not finish, get a pink sheet.

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1 Reminder to turn homework in to top tray. If you did not do it, or did not finish, get a pink sheet. the study of how people try to satisfy their limited or scarce resources with their unlimited wants Exists when there is not enough resources to produce all the things people want. Time Space Money Old economics textbooks collected in a bookcase near a teacher s desk with a sign that says Free books, take as many as you want. The books have been there for years. Not scarce. No alternative valuable use. 1

2 Mrs. Lawell has a drawer full of pencils. An overflowing drawer of pencils! She lets all her students use a pencil if they need to. Other teachers may not have this same policy. Scarce, because it has value. Students may give out pencils or may come and ask for pencils while in other classes. Petroleum in Saudi Arabia, a country with many oil fields and oil reserves. Scarce. Even though they have oil reserves, petroleum can be used for many things. They can also sell it to other countries. To meet health standards for food preparation in the cafeteria, students must throw away all their uneaten food at lunch, even if it is prepackaged and has not been opened. Scarce resource treated as not scarce. The food could feed hungry people and also could be stored for later use. Need: necessary for survival Want: NOT necessary for survival What to Produce How to Produce For Whom to Produce 2

3 Because the world has scarce resources and societies need to make careful choices about the way they use these resources Resources required to produce the things we would like to have, are land, capital, labor and entrepreneurs. Includes the gifts of nature or natural resources not created by human effort Examples: Deserts, fertile fields, forests, mineral deposits, livestock, sunshine, and the climate necessary to grow crops. Includes the tools, equipment, and factories used in production. Examples: Bulldozers, computers, farm equipment Includes people with all their efforts, abilities and skills. 3

4 Individuals who start a new business or bring a product to market. Some people are singled out b/c they are the innovators in our economy. Capital Goods Desks Textbooks Lab equipment Production of Your Education Labor Teachers Administrators Assistants Needed to organize the other three factors and make sure everything gets done Land School Property Timber and Iron ore used to make the building What would happen if one of the factors of production was missing? No Production! A useful, tangible item, such as a book, car or ipod that satisfies a want. Capital Goods (a tractor on a farm, an oven in a bakery) manufactured goods used to produce other goods and services Consumer Goods Goods intended for final use by individuals 4

5 Durable Good any good that lasts 3 years or more when used on a regular basis Capital good-tractor; Consumer good-automobile Nondurable Good Any good that lasts for less than 3 years when used on a regular basis. Food, notebook paper, most clothing Work that is performed for someone Differences between a good and a service is that a good can be touched; a service can not. Adam Smith One of the first people to describe how markets work Some necessities had low monetary value (water) Some non-necessities had high monetary value (diamonds) The capacity to be useful and provide satisfaction For something to have value, it must also have utility Is not fixed or measurable Varies from person to person Definition of value: monetary worth of a good or service as determined by the market For something to have monetary value, it must be scarce and have utility 5

6 The accumulation of products that are tangible, scarce, useful, and transferable from one person to another. A location or other mechanism that allows buyers and sellers to exchange a specific product Types of Markets: Local, national, global, cyberspace Factor Markets where factors of production are bought and sold and individuals earn incomes. Product Markets where goods and services are bought and sold (Final sale goods) 6

7 Occurs when a nation s total output of goods and services increase over time. Productivity- a measure of the amount of goods and services produced with a given amount of resources in a specific amount of time *most important factor* Productivity goes up when more can be produced with the same amount of resources. Investments In Human Capital The sum of people s skills, abilities, health, knowledge, and motivation Education and healthcare Divisions of Labor A way of organizing work so that each individual worker completes a separate part of the work Examples: Factory Assembly line, Racing Pit Crew Specialization the assignment of tasks to the workers, factories, regions, or nations that can perform them more efficiently WOW! When Henry Ford introduced the assembly line to the automobile industry, Assembly time was cut from 1.5 days to 90 minutes and price of a new car by 50%!!! Economic Interdependence Mutual dependency of one person s firm s, or region s economic activities on another 7

8 Economic choices involve trade-offs and the careful evaluation of opportunity costs. Every decision we make has its trade-offs, or alternative choices. Opportunity costs, are the cost of the nextbest alternative; opportunity lost; what is given up Trade-Offs (Choices) Top 2 Choices Final Choice Shoes Purses Opportunity Cost Diagram representing the maximum combination of goods and/or services an economy can produce when all productive resources are fully employed Explain why this Valentine card may be comical. 8

9 Us become better decision makers. Us understand the complex world around us. People become better citizens! 9