Economics

Chapter OneObjective: Explain why limited

resources force people into making decisions about their wants and needs

Bell Ringer

• List 4 items you need to survive on a daily basis

• List 4 items you WANT• Give them a value… the value

can be a daily, monthly, etc..

BILTMORE…owned by George Vanderbilt

3 people lived here• We all want MORE, MORE, MORE • Maybe not this much but we want more

Scarcity--

• Not enough resources to produce ALL THAT WE WANT

EconomicsHow we try to satisfy our wants by

watching how we use limited resources

• What is a NEED??? • What is a WANT?

Who decides what to produce?How to produce?Who will receive the goods has a lot to do with the cost and scarcity?The more scare the good the more expensive the item.

Factors of production

• LAND • Fixed• Limited• Could be the land the

company is sitting on• …. the land the crops

are grown on• ….. the coal mined• …..the water

• Capital• Money • Tools to make a product• $$$$$$ to buy

FACTORS OF PRODUCTION

• LABOR• WORK EFFORT TO

PRODUCE GOODS

• Entrepreneur ??????

ECONOMICS::::GDP

• GDP: DOLLAR VALUE OF ALL GOODS PRODUCED IN A COUNTRY

• Jobs • Taxes• Prices

Who was the entrepreneur for the following companies?

• Winn Dixie• Vera Bradley• Walmart• Russell Sportswear• SaltLife• Mitchell Drugs• Belle Bouquet• Trax Tires

• Saraland Produce • Something Special Deli• AFLAC• Mercedes-Benz• Mayfield Icecream• Under Armour

Section 2

• You are a valuable part of this economy

• You are a consumer

• What goods do you CONSUME????

• The goods you can touch• List 5

• These are

CONSUMER GOODS…intended for your use

Capital Goods

• The computer on my desk is used to produce

Durable Goods

• A good that last longer than 3 years

Non-durable good

• A good that last less than 3 years

Good----Services

• Usually ---Not something you can see or hold when you get to the house

The VALUE of a good…

• Determined by the scarcity of the good

• If you are out of gas on the side of the interstate and a service will bring you gas for $6.00 a gallon…Is it worth it???

Paradox of Value

• Things that are necessary..

• GOTTA HAVE IT!!!! Have little monetary value

• While items of little use have high value

• CRAZY HUH?!

UTILITY• Value has little to

do with UTILITY• The question is

HOW much satisfaction does owning the good bring to you the consumer???

• The more satisfaction you get from owning the product the more the seller can charge for the good.

• The more value you place on a good when you desire to sell it…the higher the price you will accept

VALUE• MONETARY VALUE• TO HAVE A HIGH

MONETARY VALUE IT IS USUALLY USEFUL AND

SCARCE

WEALTH

• Goods are counted as wealth

• Services are not listed or considered as wealth you are holding..

• You must be able to reach out and touch the wealth..

• This man is not wealthy because he holds the skill to be a doctor…he would be wealthy because of the goods his jobs has allowed him to purchase

ECONOMIC FLOW

These guys spend money when they get paid

WHERE PRODUCERS SELL THEIR GOODS

WHERE YOU SELL YOUR LABOR OR LAND IS SOLD FOR RENT

ECONOMIC GROWTHTHE MORE GOODS BEING PRODUCED THE MORE MONEY BEING MADE????

PRODUCTIVITY• How efficient is production?• How much can be produced

in a given time::• Great Example: cotton gin• Price of cotton went down

significantly after the ginning machine cut the time down

• Less need for human labor increases productivity

HUMAN CAPITAL• People’s skills, knowledge• To increase knowledge

increase the value of human capital

• When a business trains you for a new job they are investing in your capital

ECONOMIC GROWTH

DIVISION OF TASK • Rather than a job being

completed by one person the task of a job will be divided

• One will specialize in a particular part of production

• Specialization: • The individual becomes

more efficient in that task

ASSEMBLY LINE

Section 3

• Adam Smith:::• Supported

laissez-faire—LET IT BE GOVERNMENT!!!!

Trade offs

• If you trade the next four years of work for college will there be a benefit????

• You weigh the trade offs every time you make a decision…

• The values you give opportunities or goods help you make decisions.

OPPORTUNITY COST

• You came home from the mall with a small bag• What is in it?????• WHAT ELSE DID YOU HAVE AN OPPORTUNITY TO

BUY AT THAT TIME • PHONE OR CLOTHES

• WHAT ELSE DID YOU HAVE AN OPPORTUNITY TO DO AT THAT TIME

• COLLEGE OR WORK

PRODUCTION POSSIBILITIES CURVE

• The economy does not have enough factors of production to produce output beyond the frontier. If producing within the frontier, the factors of production are being used inefficiently, and there is potential to produce more output.

Production possibilities curve

PRODUCTION POSSIBILITIES CURVE

• A production possibilities curve illustrates:?

A. scarcity.

B. market prices.

C. consumer preferences.

D. the distribution of income.

COST BENEFIT ANALYSIS• Does the benefit

warrant the cost?

• Working out at gym for 4 hours ……

OR..• Studying for 4 hours

FREE ENTERPRISE ECONOMY

FREE ENTERPRISE

• BUSINESSES AND CONSUMERS DECIDE WHAT WILL BE PRODUCED AND WHO THOSE GOODS WILL BE PRODUCED FOR

•NOT GOVERNMENT

STANDARD OF LIVING

• When prices drop for goods then people can enjoy the pleasure of buying

• Their standard of living goes up.

• During the Roaring 20s we boasted of such a great Standard of Living in US then…….The Great Depression