agenda review class rules key terms article worksheet student videos production possibilities curve...

AgendaReview Class RulesKey TermsArticleWorksheet Student VideosProduction Possibilities Curve

Production Possibilities WorksheetHOMEWORK

Review Powerpoint for next class (online)Read “Current Reading Assignment” (online)

Class RulesBe on timePay attentionBe preparedDon’t use cellphones during class

• Comments• You are responsible to monitor your grade

• You are responsible to seek help (e-mail is best way to contact me)

Being Prepared

Do the readingAssigned

Print and Review the Powerpoint before class

Course Overview – Review

Powerpoints introduce the concepts

Lectures explain the concepts

Readings, videos, movies apply the concepts

Course Overview – Review

Powerpoints introduce the concepts


Readings, videos, movies apply the concepts

So if you don’t review and print the powerpoints before class, success is not likely

Course Overview (cont.)


not enough class time to write down all the information contained in the powerpoints

Absences

You are responsible for…• Getting the material

• Reviewing the Class Presentations (posted on Facebook)

• Getting the homework assignment, reading assignment, etc.

Absences (continued)

Tests…

You need will make-up the test at detention when you return.

You will receive a ZERO if you have not made arrangements and I return the test.

E-mail is the best way to make arrangements to take the test.

Extra Credit given to the class is everyone attends class on test day.

Additional Class Materials

Multi-Colored pens (or pen)One inch three ring binder

Laptops, kindles, iPads, etc.

Yes, you can use them.

Module 1 – What is Economics?

Economics is the study of human behavior. How people allocate limited resources to produce goods and services to satisfy unlimited needs and wants.

Key termsFactors of ProductionScarcity vs. shortageNeed vs. wantGood vs. ServiceTrade-off vs. Opportunity CostEntrepreneur

Four Factors of Production (resources)1. Land

All Natural resourcesExample - Oil, Coal, Trees

2. Labor People producing a good or service

Example – Auto worker, Lawyer, Teacher

3. Human Capital• Training for Labor

Example – College Education, Seminars

4. Physical Capital Tools used by labor to make goods and services

Example – Computers, Buildings, Factories, desks

Definition of Economics….The study of human behavior. How people allocate limited resources* to produce goods and services to satisfy unlimited needs and wants.

*The four factors of production are resources that are limited.

Scarcity vs. shortage

Scarcity is permanent

• But not necessarily a small amount• Example: Ocean water

Shortage is temporary

• But temporary may be days, weeks months or even years

Need vs. Want

Need = gotta have itWant = nice to have it

For each person to decideCellphone example

The study of human behavior. How people allocate limited resources to produce goods and services to satisfy unlimited needs and wants.

Good vs. Service

Good• Tangible• Generally produced with physical skills,

physical capital• Examples….a car, a desk, an airplane

Service• Intangible• Generally produced with knowledge, human capital• Examples…Medical services, legal services, education

Trade-off vs. Opportunity Cost

Trade-off = All the choices given up

Opportunity Cost = Most valuable choice (trade-off) given up

Examples• Your time• Cafeteria

The study of human behavior. How people allocate limited resources to produce goods and services to satisfy unlimited needs and wants.

Because resources are limited, you have to make choices.

“There is no free lunch.”

There are always trade-offs.

EntrepreneurUses resources (factors of production) to

produce goods and services to satisfy needs and wants

EntrepreneurUses resources (factors of production) to produce goods and services to satisfy needs and wants

EntrepreneurUses resources (factors of production) to

produce goods and services to satisfy needs and wants

ExamplesLa Salle HSJack FMBank ATMAmazon.com

Quick Review…

1. What is the difference between a shortage and scarcity?(a) A shortage can be temporary or long-term, but scarcity always exists.(b) A shortage results from rising prices; a scarcity results from falling prices.(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.(d) There is no real difference between a shortage and a scarcity.

2. Which of the following is an example of using physical capital to save time and money?(a) hiring more workers to do a job(b) building extra space in a factory to simplify production(c) switching from oil to coal to make production cheaper(d) lowering workers’ wages to increase profits

ArticleSearch Economic Terms

WorksheetChapter 1, Section 1

Student videos

http://www.youtube.com/watch?v=fdM8ssBvNxU

THREE MINUTE BREAK

http://www.online-stopwatch.com/full-screen-stopwatch/

Be back when time expires or detention awaits you.

Production Possibilities CurveGraph showing the trade-offs (i.e. possible

production outcomes)

Production Possibilities CurveGraph showing the trade-offs (i.e. possible production outcomes).

Trade offs is a key concept. More of one good or service, less of the other.

Product (good or service) B

Product (good or service) A

Production Possibilities CurveWhy is the production possibilities curve

“bowed out”?


“bowed out”?

ANSWER: The Law of Increasing Opportunity Costs


“bowed out”?


As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.


“bowed out”?


As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.

WHY you might askExample

Watermelons (millions of tons)

Shoes(millions of pairs)

Sh

oe

s (

mil

lio

ns

of

pa

irs

)

25

20

15

10

5

0 252015105

Production Possibilities Graph


14

18

20

21

12

9

5

0

0 15

8 14

c (14,12)

d (18,9)

A production possibilities graph shows the cost of producing an item. To produce the first eight million tons of watermelons cost of 1 million pairs of shoes. The Trade Off (the real cost) of producing the first eight million tons of watermelons (to go from 0 to 8) is the one million tons of watermelons that you give up (going from 15 to 14)

Point A

Point BA B

At Point A you can produce 0 watermelons and 15 million pairs of shoes. At Point Byou can produce 8 million tons of watermelons and 14 million pairs of shoes.

Trade-offs

Why would the entrepreneur choose to produce more watermelons?

What is the cost of that decision?

What is the benefit?

Why does Apple choose to produce more iPads?

What is the cost of that decision?

What is the benefit?


Shoes(millions of pairs)

Sh

oe

s (

mil

lio

ns

of

pa

irs

)

25

20

15

10

5

0 252015105



14

18

20

21

12

9

5

0

0 15

8 14

c (14,12)

d (18,9)

What is the cost to produce the first million pair of shoes?

Law of Increasing Costs…Revisited

The Law of Increasing Opportunity Costs - As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.

The cost of first million shoes cost 200,000 tons of watermelons

The cost of the fifteenth million (still one million shoes) cost eight million tons.

THE COST INCREASED

Law of Increasing Costs…Continued

Why is that the case?

Law of Increasing Costs…Continued

Why is that the case?

Because the entrepreneur uses the best shoe making resources (most productive factors of production) for making shoes first…the worst / least productive last. As such, it requires more resources to produce the last ton.

Sh

oe

s (

mil

lio

ns

of

pa

irs

)

25

20

15

10

5

0 252015105



g (5,8)

A point of underutilization

c (14,12)

d (18,9)

e (20,5)

f (21,0)

a (0,15)b (8,14)

S

Efficiency means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating efficiently.

Efficient is on the production possibilities curve. Anywhereon the curve but on the curve.

Sh

oe

s (

mil

lio

ns

of

pa

irs

)

25

20

15

10

5

0 252015105



T

Future productionPossibilities frontier

c (14,12)

d (18,9)

e (20,5)

f (21,0)

a (0,15)b (8,14)

S

Growth If more resources become available, or if technology improves, an economy can increase (more stuff) its level of output and grow. When this happens, the entire production possibilities curve “shifts to the right.”

Guns or ButterPhrase used by economists to describe trade-offs.

Military Goods (guns)

Consumer Goods

(Butter)

Worksheet, Production Possibilities Curve

Homework Print and Review Powerpoint for next class Two Reading Assignment for next class

1. “There's No Such Thing As a Free Lunch”

Questions to consider (i.e. be able to answer)

• What is the opportunity cost to Adam of failing to start saving at age 18?

• What is the opportunity cost to John of saving at age 18? What did he give up? (Hint: there is no single right answer, you have to think “What might John have given up?”)

2. “Pass the Book, Hold the Oil”

Questions to consider

• What factor of production is key to Taiwan’s success?

• Which factor of production was important.... When Columbus sailed to the new world? During the period of colonization? During the industrial revolution?

• How does this effect you in 2013?

There's No Such Thing As a such thing as a free lunch". The adage refers to the idea that it is impossible for a man to get something for nothing. Every choice you make has a next, best alternative that you could have chosen but didn't. That foregone opportunity is known as opportunity cost. That is, the price you paid for doing whatever it is you did was the opportunity you can no longer enjoy.

Whether or not you are successful in life depends almost entirely on how well you manage your own, personal opportunity cost. What if Julia Child hadn't begun cooking at age 37? What if Sam Walton hadn't started Wal-Mart stores at 44 years old? What if Warren Buffett had listened to his father, Howard Graham, and his mentor, Benjamin Graham, and not gone to work in the investment industry? The opportunity cost of each of those decisions would have been staggering, in retrospect. That is the nature of life. As the CEO of your time here on Earth, you have to decide how to manage your own opportunity costs. Do you go to art school or become a doctor? Do you invest in the hi-tech start-up your friends are putting together or strike out on your own?

Opportunity cost is all around you. Do you go to the gym or eat a cookie? Apply for that job in an industry you love or stick with a field in which you are comfortable? But it is especially present in your finances. It can go unnoticed because the average person doesn't know the power of compound interest and the effect small decisions can have on where you ultimately end up on your journey to wealth. A single $4 coffee from Starbucks invested at 10% for 50 years is really $470. A $9 lunch is really $1,057 in future wealth gone. That is why I

HANDOUTS

agenda review class rules key terms article worksheet student videos production possibilities curve...

Documents

class slide

powerpoints slide

education slide

bvnxu slide

likely slide

ring binder slide

limited resources

class time