ECONOMICS. Mr. Hughes Student Information Syllabus & Class Rules What is Economics? Term of the Day

Transcription

1 ECONOMICS Mr. Hughes Student Information Syllabus & Class Rules What is Economics? Term of the Day

2 Unit One Fundamental Economic Concepts

3 Standard SSEF1: The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity cost, and tradeoffs for individuals, businesses and governments

4 Section 1: Scarcity and the Factors of Production Defining Economics: Economics is the study of how people seek to satisfy their needs and wants by making choices Or study of choice

5 Microeconomics v. Macroeconomics Microeconomics is the study of the choices made by consumers (households) and producers (businesses) Macroeconomics focuses on the big picture, such as trends in a nation s economy such as the business cycle

6 Wants expressions of desire Example: Needs requirements for survival Example: Why do we need to make choices to satisfy out needs and wants? Why can t we have everything we need and want?

7 Scarcity There are not enough resources to satisfy all of our needs and wants Scarcity is not a shortage. Everything is scarce, but a shortage is a temporary situation

8 Productive Resources Resources are used to produce goods and services Natural, Human and Capital OR Land, Labor & Capital

9 Natural Resources Land, as well as all other gifts of nature

10 Human Resources Labor the time and physical effort by workers Human Capital knowledge and training that people bring to their work

11 Capital Resources Physical Capital are the tools, machines and structures used in the production process.

12 Importance of Entrepreneurship Entrepreneurs pay for productive resources in order to produce goods and services Profit motive Improve society through innovation

13 Payment for each factor: Land is paid for by Rent Labor earns Wages Capital is paid for by Interest Entrepreneurs receive Profit

14 Section 2 Opportunity Cost

15 Trade Offs Trade offs must be made when choosing between alternatives Individuals, businesses and societies all make trade offs Guns and butter the choices a society must make between consumer goods and governmental institutions

16 North Korea more guns than butter

17 Marginal Analysis Thinking on the margin In economics, the margin or marginal means extra or additional. Options Benefit Opportunity Cost 2 hr. study time 1000 on SAT 2 hour work/$16 4 hr study time 1100 on SAT 4 hours work/$32 6 hr study time 1200 on SAT 6 hours work/$48

18 Marginal Cost & Benefit Marginal cost is the cost of consuming one more unit of a product Marginal benefit (aka marginal returns) is the benefit of consuming one more unit of an item One should take an economic action if the benefit is greater than the cost

19 Opportunity Cost The cost of the next best item given up when making a trade off is called the opportunity cost what you could have had instead

20 Division of Labor Early in human civilization, people began to specialize in their labor During the industrial revolution, factories began to practice division of labor focusing each worker on a specific task to increase productivity Productivity = # units produced / # of workers

21 Section 3 The Production Possibilities Curve PPC: A graph showing the amounts of 2 goods or services that can be produced The production possibility frontier is the line itself

22 Law of Increasing Costs To produce higher amounts of a product, it takes an increasing amount of resources This explains the rounded shape of PPC It s easy to improve when you are average, but hard to improve if you are at the top

23 140

24 Uses of the PPC 1. Efficiency means using resources in such a way to maximize output, on the line (Points A, B or C) Point E is not possible since it is outside the point of efficient production 2. Production inside the line is inefficient or underutilization (point D).

25 (uses, cont) 3. Growth if the production capacity increases, the curve expands outward Growth occurs by gaining more land, labor or better technology (capital)

26 4. Cost a PPC shows the opportunity cost of one item in terms of another. How much does 40 TVs cost?

27 Comparative and Absolute Adv. Chpt. 17, Section 1 International Economics Trade between countries is based on the concept of opportunity cost

28 Why do Nations Trade? Resource Distribution Natural resources Human Capital (skills and education) Physical Capital infrastructure

29 Oil Reserves

30 Percentage of arable (fertile) land

31 World Literacy Rates

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33 Comparative and Absolute Advantage The PPC can be used to demonstrate this concept of specialization and trade Instead of improving what you do poorly, dedicate all resources to improving what you do well

34 Absolute Advantage ability to produce more of a given good or service with current resources Comparative Advantage ability to produce a resource with a lower opportunity cost with current resources

35 Production Possibility Curves Brazil Coffee (tons) Columbia Coffee Beef Beef (tons)

36 Which country has an absolute advantage in producing coffee? Which country has an absolute advantage in producing butter? What is the opportunity cost of each good in each country? What should they do?

37 Comparative Advantage Infographic

38 Should LeBron James mow his lawn?