domain 1 fundamentals of - wordpress.com · 10/1/2017 · explain why limited productive resources...

Domain 1

FUNDAMENTALS of

Georgia Standards of ExcellenceCONCEPT CLUSTER

SSEF1

Explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses and governments

• Scarcity

• Cost/Benefit Analysis

• Opportunity Cost

• Tradeoffs

• Factors of Production

• Allocation Strategies

Scarcity and the Factors of Production

• What is economics?

• How do economists define scarcity?

• What are the four factors of production?

Economics is…scarcity forcing us to make decisions

about allocating limited resourcesto get the unlimited number

of things we want.

Our enduring understanding…

Scarcity and Shortages…

Scarcity occurs when

there are limited

quantities of

resources to meet

unlimited needs or

desires.

Shortages occur

when producers will

not or cannot offer

goods or services at

current prices.

An Opportunity Cost is…

the most desirable benefit given up to take another

course of action.

Trade-Offs, on the other hand are…

all of the alternatives that we give up whenever we choose one course

of action over others.

Factors of Production

Land (land & water)

Human (labor, skills)

Capital (capital goods)

Entrepreneurship

The Factors of Production…• Land All natural resources that are used to produce goods and

services.

• Labor Any effort a person devotes to a task for which that

person is paid.

• Capital Any human-made resource that is used to create other

goods and services.

• Entrepreneurship the skills to organize & effectively utilize the

production factors

Factors of Production Activity

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Natural Resources

Human Resources

Capital Good

Entrepreneur

Goods and Services∞

Producers and Consumers

People use these 4 productive resources to produce goods and services that other people want (hopefully) and will consume. The producer then earns a profit if the production costs are less than the selling price that consumers are willing and able to pay.


Everyone wants that delicious Snickers bar….so

A Three Hour Tour

We start here…

We all pile into this…

We head here…

We forget to take this…

…then this…

…when we go to check our phones…

…you guys were freaking out…

…so I had to swim all of you in…Thank you!

I only have time to save 5 things• 30 cans of SPAM

• Two cases of Bottled Water

• Mirror

• Machete

• Medical Kit

• Wedding Dress

• A Labrador Retriever named Stacey

• A flare gun with two flares

• Bible

• 20 Gallon plastic container

• 40 pair of blue jeans (various sizes)

• 12 ft of rope

• A Swiss army knife

• One case of Oreo cookies

• Season two of “Game of Thrones” on DVD

• $500.00 cash

• 6’ x 6’ tarp

• A Chainsaw (w/fuel)

• Book on South Pacific Plant life

• 1 XL Lebron James jersey

How to figure out what to get?(ALLOCATION STRATEGIES)

• Price

• Personal characteristic

• Majority Rule

• Competition

• Force

• Sharing

• Lottery

• Authority

• First-come, first-served

Scarcity and the H1N1 Virus

Background

• In 2009 a mini-epidemic of “swine-flu” broke out across the country

• Swine flu is a severe form of flu that combines a mix of several viruses

• The symptoms are similar to regular flu, just much more severe

• The news began reporting deaths from swine flu in September, which signaled a flurry of people wanting the H1N1 vaccine

Problem?

• The production of the H1N1 vaccine had been significantly delayed for multiple reasons

• Only 14% of the orders of the vaccine were being filled at one point

• In several places riots broke out at health clinics where people were told there was not enough

Problem?

• The FDA eventually released a statement saying that while the disease was dangerous for everyone, it was

MOST dangerous to the following groups:

“Pregnant women, people living with or caring for infants, emergency medical personnel and healthcare workers, children and young adults from 6 months to

24 years and any adult with chronic medical conditions”

Decision Time!

You are the manager of a local health clinic. You have 3 doses of the H1N1 vaccine left. The following 9 people come to you for help, to which 3 will you give the vaccine?

Who gets the vaccine?• Jake, a 45 year old widowed male with

3 young children at home. He is willing to pay triple your price

• Kelly, a divorced 35 year old mother of 2 middle school-aged children who works two jobs to make ends meet

• Monique, a 75 year old female who has lived in this community all her life with government health insurance

• Fred, a 45 year old former Olympic gold medalist with a heart condition who does much charity for the community, but has very little money

• Tiara, a 2 year old who easily contracts colds and sickness

• Brooke, a 35 year-old mother of 3 who is 4 months pregnant

• Jo, a 29 year old healthy EMT who actually helped save your grandmother’s life last year

• Tyrone, an 18 year old track star with a full ride scholarship to a major university

• Arthur, a 85 year old retired military veteran who recently suffered a stroke, but is recovering

How to allocate resources

• Price

• Personal Characteristic

• Majority Rule

• Competition

• Force

• Sharing

• Lottery

• Authority

• First-come, first-served

What are your questions?


SSEF2

Give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.

• marginal cost• marginal benefit

SSEF3

Explain how specialization and voluntary exchange influence buyers and sellers.

• Specialization • Voluntary Trade

Markets…

• How do we define Marginal cost, marginal benefit, and specialization?

• How do free markets operate?

• How can markets regulate themselves?

• What are the advantages of a free market economy and voluntary exchange?

Marginal Cost is…

the cost added by producing one additional unit of a

product or service

Marginal Benefit is…

additional satisfaction or utility that a person receives from

consuming an additional unit of a good or service

Specialization is…a business, area or economy

focuses on the production of a limited scope of products or

services to gain greater degrees of productive efficiency within an

overall system

Voluntary Exchange is…

Free, mutually beneficial, and non-fraudulent exchange of goods and

services between buyers and sellers in the marketplace.

Does anyone in the room believe they are completely independent/self sufficient?

…and that is why people trade.

Creating Happiness Through Trade

• You will be given paper bag containing a good. Do NOT share the contents of the bag with anyone at this point.

• Rate your level of happiness with the contents from 1 to 5.

1 means you find the item practically useless and

get almost no value from it

5 means you are about as happy as you could be!

Creating Happiness Through Trade

Record of ratingsRound 1 2 3 4 5

Initial rating

LimitedTrading 1

Limited Trading 2

Free Trade

The Market’s Self-Regulating Nature• In every transaction, the buyer and seller consider only their self-

interest, or their own personal gain. Self-interest is the motivating force in the free market.

• Producers in a free market struggle for the dollars of consumers. This is known as competition, and is the regulating force of the free market.

• The interaction of buyers and sellers, motivated by self-interest and regulated by competition, all happens without a central plan. This phenomenon is called “the invisible hand of the marketplace.”

Advantages of the Free Market…

Economic Efficiency

• As a self-regulating system, a free market economy is efficient.

Economic Growth

• Because competition encourages innovation, free markets encourage growth.

Economic Freedom

• Free market economies have the highest degree of economic freedom of any economic system.

Additional Goals

• Free markets offer a wider variety of goods and services than any other economic system.


SSEF4

Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.

• Economic Systems

• The three basic economic questions

Economic Systems


Economic SystemsPeople create

rules for trade that fall along a continuum between command and market.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/Georgia Council on Economic Educationw w w . g c e e . o r g

Economic Systems

Command Market

Incentives Matter


Economic Systems

Command Market


Economic Systems


SSEF5

• Describe the roles of government in the United States economy.• Broad Social Goals


Broad Social Goals of an Economy

Economic EfficiencyEconomic EquityEconomic FreedomEconomic GrowthEconomic StabilityEconomic Security

Economic EfficiencyEconomic efficiency means…allocating scarce productive resources to produce the goods and services that people want and using inputs in a manner that keeps production costs as low as possible.

Economic EquityEconomic equity means…

what is “fair.” Economic actions and policies have to be evaluated in terms of what people think is right or wrong. Equity issues often arise in dealing with the distribution of income and wealth.

To some, equity means providing equal opportunity; to others, equity means equality of outcomes.

Economic freedom means…

allowing consumers to decide how to spend or save their incomes, allowing workers to change jobs, to join unions, and allowing individuals to establish new businesses and close old ones.

Economic Freedom

Economic growth means…

increasing the production of goods and service over time. Economic growth is measured by changes in the level of real gross domestic product (GDP). A target annual growth rate of 3 percent to 4 percent in real GDP is generally considered reasonable and sustainable.

Economic Growth

Economic stability means…

maintaining stable prices and full employment and keeping economic growth reasonably smooth and steady. Price stability means avoiding inflation or deflation. Full employment occurs when an economy’s scarce resources, especially labor, are fully utilized.

Economic Stability

Economic security means…

protecting consumers, producers, and resource owners from risks that exist in society. Each society must decide from which uncertainties individuals can and should be protected, and whether individuals, employers, or the government should provide or pay for this protection.

Economic Security

Public Policies1. Requiring health insurance by all members of society.

2. Indoor smoking laws that prohibit smoking to improve air quality.

3. Tariffs imposed on imported clothing to protect domestic manufacturers of clothing.

4. Requiring motorcycle riders to wear helmets.

5. Taxing capital gains at a lower rate than wage income.

6. Shortening the length of time unemployment benefits may be collected.

7. Taxing sodas that contain excessive amounts of sugar.

8. Providing subsidies to farmers.

Georgia Standards of Excellence CONCEPT CLUSTER

SSEF6

Explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people.

• Productivity

• Investment in Capital Tools

• Investment in Human Capital

Productivity

1950, the average U.S. corn farmer was able to harvest 39 bushels of corn from an acre of land.

2009, the average U.S. corn farmer was able to harvest 165 bushelsof corn from an acre of land.

In 1950 the average amount of milk per cow was 5,314 pounds per year.

(one cow=500 pounds of milk)

In 2009 the average amount of milk per cow was 20,848 pounds per year.

(one cow=500 pounds of milk)

Average U.S. farm output in 1950

Average U.S. farm output in 2009

Essential Question : How in the heck did farmers get so good in the last 50 years?

Answer: technology/productivity

When examining farming (1950 v. 2009), how has technology affected productive resources?

Land Labor Capital

How can workers increase their productivity?

1. Use the latest/greatest capital resources

2. Increase human capital

Production Possibilities Graphs

• What is a production possibilities graph?

• How do production possibilities graphs show

efficiency, growth, and cost?

• Why are production possibilities frontiers curved

lines?

Production Possibilities• A production possibilities graph shows alternative ways that an

economy can use its resources.

• The production possibilities frontier is the line that shows the maximum possible output for that economy.

Watermelons

(millions of tons)

Shoes

(millions of pairs)

Sh

oes

(m

illi

on

s o

f p

air

s)

25

20

15

10

5

0 252015105

Production Possibilities Graph

Watermelons (millions of tons)

0

a (0,15)

15

8 14b (8,14)

14

18

20

21

12

9

5

0

A production

possibilities frontier

c (14,12)

d (18,9)

e (20,5)

f (21,0)

EfficiencyEfficiency 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.

Sh

oes

(m

illi

on

s o

f p

air

s)

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

Growth

Growth If more resources

become available, or if

technology improves, an

economy can increase

its level of output and

grow. When this

happens, the entire

production possibilities

curve “shifts to the

right.”

Sh

oes

(m

illi

on

s o

f p

air

s)

25

20

15

10

5

0 252015105



T

Future production

Possibilities frontier

c (14,12)

d (18,9)

e (20,5)

f (21,0)

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

S

Cost

Cost A production possibilities graph shows the cost of producing more of one item. To move from point c to point d on this graph has a cost of 3 million pairs of shoes.

Watermelons

(millions of tons)

Shoes

(millions of pairs)

Sh

oes

(m

illi

on

s o

f p

air

s)

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)

domain 1 fundamentals of - wordpress.com · 10/1/2017 · explain why limited productive resources...

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