LET S TRY AN EXERCISE: [& Learn some economic concepts]

Transcription

1 ECONOMICS IS THE ST U DY O F M A N K I N D I N THE ORDINARY B U S I N ES S O F L I F E. A L F R E D M A RS H A L L LET S TRY AN EXERCISE: [& Learn some economic concepts] ZOO CHOICES 25 ACRES TOTAL! Your group is building a new zoo. You have to decide what animals to have. Space is limited. You get 25 acres. Take 8-10 minutes to make your selections, based on the next slide. Lion - 2 acres Turkey - 1/10 acre Giraffe -1 acre Seal - 1/2 acre Camel - 1/2 acre Cheetah - 1 acre Cow - 1/3 acre Monkey - 1/2 acre Asian Elephant - 1 acre African Elephant acres Reptile House - 5 acres Hammerhead Shark - 1/2 acre Kangaroo - 1/2 acre Tiger - 1 acre Whales - 3 acres House of Birds - 5 acres *Numbers are acres required for ONE animal (hint: they don t like being alone!) [If you had 2 of each, it would take over 34 acres so you will have to make choices.] Two monkeys To get you started here are some examples of what you might do! This would have taken care of 7 of the 25 acres. 18 more to go! Two Asian elephants Two camels Two seals Remember that 2 of each helps future zoo stock. Two tigers Lion - 2 acres; Turkey - 1/10 acre; Giraffe -1 acre; Seal - 1/2 acre; Camel - 1/2 acre; Cheetah - 1 acre; Cow - 1/3 acre; Monkey - 1/2 acre; Asian Elephant - 1 acre; African Elephant acres; Reptile House - 5 acres; Hammerhead Shark - ½ acre; Kangaroo - 1/2 acre; Tiger - 1 acre; Whales - 3 acres; House of Birds - 5 acres. *Numbers are acres required for ONE animal (hint: they don t like being alone!) [If you had 2 of each, it would take over 34 acres so you will have to make choices.] 1

2 QUESTIONS 1. Why didn't your group put one of every animal in the zoo? Scarcity What resource are you limited on? We had a TINSTAAFL problem. If we wanted more on one animal we had to give up more of another animal. 2. Why didn't your group put a turkey in your zoo? Benefits vs. costs (turkeys, like cows, are too common) 3. Why didn't your group have a zoo with only monkeys? Diminishing[less] marginal[extra] utility[satisfaction] 4. Why did your group choose an Asian elephant and not an African elephant? Benefits vs. costs (the Asian Elephant takes less land) QUESTIONS 5. What was the last animal to make the cut for your zoo? Marginal Analysis 6. What was the animal that just missed the cut for your zoo? That animal is the opportunity cost [ opportunity lost ] 7. What animal did everyone in your group agree to include? 8. Would everyone in your group have made the same choices if they did the zoo alone? Individual benefits vs. social benefits Knowledge Define each of the productive resources (natural, human, capital) Reasoning Explain why productive resources are necessary for the production of goods and services. Explain how consumers and producers confront the condition of scarcity, by making choices that involve opportunity costs and tradeoffs. Skill Use a production possibilities curve to explain the concepts of choice, scarcity, opportunity cost, tradeoffs, productivity, and growth. 1. It helps us become better decision makers. 2. It helps us understand the complex world around us. 3. It helps people become better citizens! 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. 2

3 Exists when there is not enough resources to produce all the things people want. Resources are limited 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. 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. What to Produce How to Produce For Whom to Produce 3

4 Resources required to produce the things we would like to have, are land, capital, labor and entrepreneurs. LAND 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. Resources required to produce the things we would like to have, are land, capital, labor and entrepreneurs. CAPITAL Includes the tools, equipment, and factories used in production. Examples: Bulldozers, computers, farm equipment Resources required to produce the things we would like to have, are land, capital, labor and entrepreneurs. LABOR Includes people with all their efforts, abilities and skills. Examples: Police officers, janitors, engineers, cashiers, etc. Resources required to produce the things we would like to have, are land, capital, labor and entrepreneurs. ENTREPRENEURS 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. Examples: Big names like, Steve Jobs, Sam Walton, Henry Ford, to small business owners. 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 4

5 What would happen if one of the factors of production was missing? No Production! 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 next-best alternative; opportunity lost; what is given up Trade-Offs (Choices) Top 2 Choices Final Choice Pizza Calzones Opportunity Cost Diagram representing the maximum combination of goods and/or services an economy can produce when all productive resources are fully employed Points on the curve represent different possible production combinations. Laptops Tablets A B C Diagram representing the maximum combination of goods and/or services an economy can produce when all productive resources are fully employed Points on the curve represent different possible production combinations. By moving from point B to point C, what (how much) is given up? Laptops Tablets A B C Laptops 5

6 Diagram representing the maximum combination of goods and/or services an economy can produce when all productive resources are fully employed Points on the curve represent different possible production combinations. By moving from point B to point C, what (how much) is given up? Points to the left of the curve: inefficient, idle resources, not working at full capacity Diagram representing the maximum combination of goods and/or services an economy can produce when all productive resources are fully employed Points on the curve represent different possible production combinations. By moving from point B to point C, what (how much) is given up? Points to the left of the curve: inefficient, idle resources, not working at full capacity Points to the right of the curve: impossible with the given amount of resources and methods of production 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. Physical capital are the resources and tools used in production. Examples: Tractors, trucks, ovens, etc. (not raw materials) Physical capital are the resources and tools used in production. Examples: Tractors, trucks, ovens, etc. (not raw materials) Infrastructure is the physical capital that provides the foundation for economic activity. 6

7 Human capital refers to the education, knowledge, training, and experience of a worker. The quality of a country s education system is directly tied to its productivity. Human capital refers to the education, knowledge, training, and experience of a worker. The quality of a country s education system is directly tied to its productivity. Human capital generally increases productivity more than physical capital. Human capital refers to the education, knowledge, training, and experience of a worker. Technology refers to the level of sophistication of the means of production. The quality of a country s education system is directly tied to its productivity. Human capital generally increases productivity more than physical capital. Increases in human capital shift the entire productivity graph up. College Graduate High School Graduate Scientific advances make new technology possible. Technology refers to the level of sophistication of the means of production. Technology refers to the level of sophistication of the means of production. Scientific advances make new technology possible. Research and development is how businesses turn science into useful products and processes. Scientific advances make new technology possible. Research and development is how businesses turn science into useful products and processes. Just like human capital, increases in technology shift the productivity curve up Technology 1967 Technology 7

8 A way of organizing work so that each worker completes a separate part of the work Examples: Factory Assembly line, Racing Pit Crew 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%!!! When a nation or individual concentrates its productive efforts on producing a limited variety of goods. It oftentimes has to forgo producing other goods and relies on obtaining those other goods through trade. You will have 5 minutes. You will have 5 minutes. RULES AND REGULATIONS 1) Each person works individually (except for group (e), which has pairs). 2) Do not share materials with others. 3) Do not provide assistance to others. 4) In order for a booklet to count, all math problems must be completed with correct answers and the pages must all be attached in the proper order. 5) Credit will be given for partial booklets. 6) If you finish before the five minutes is up, look at the timer for your time. Start Skip End End 8

9 End End Time Up! End After the simulation is complete, we can calculate productivity and compare it with the rest of the class. In this simulation, productivity is measured in output per minute. After the simulation is complete, we can calculate productivity and compare it with the rest of the class. In this simulation, productivity is measured in output per minute. CALCULATE DATA Output: How many booklets did you create? (If you had a partner, add both of your booklets together.) If you had partially completed booklets, estimate how complete it was to the nearest tenth. Minutes: How many minutes did you work? (If you had a partner, add both of your minutes together.) If you finished before the full five minutes, estimate how many minutes you worked to the nearest tenth. Productivity: Divide your total output by your total minutes. This number is your labor productivity. Group Average: Calculate your group s average labor productivity. Write this number in the corresponding column in the table below. See Table 9

10 CLASS PRODUCTIVITY Record the productivities of all groups in the appropriate columns. Group (a) (b) (c) (d) (e) Productivity (Output per Minute) Group (a) (b) (c) (d) (e) Productivity (Output per Minute) PHYSICAL CAPITAL Physical capital are the resources and tools used in production, not the supplies that create the final product. What physical capital was present during this simulation? Group (a) (b) (c) (d) (e) Productivity (Output per Minute) Group (a) (b) (c) (d) (e) Productivity (Output per Minute) HUMAN CAPITAL Human capital refers to the education, knowledge, training, and experience that an employee has. What human capital was present during this simulation? TECHNOLOGY Technology refers to the level of sophistication of the means of production. What technology was present during this simulation? Group (a) (b) (c) (d) (e) Productivity (Output per Minute) Each Group Was Given These Extra Resources None Scissors Scissors Instructions Scissors Instructions Calculators Scissors Instructions Calculators Extra Worker SUMMARIZE Some students were given minimal physical capital, human capital, and technology, while other students were given a great deal of each. Did higher levels of physical capital, human capital, and technology translate into higher productivities during this simulation? How can you tell? 10

11 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) 11