introduction to economics johnstown high school mr. cox production
DESCRIPTION
Resources – Factors of Production Natural resources (Land)– “free gifts of nature” Land, minerals, oil, forests, air, and timber Capital Resources – “manufactured aids to production” Tools, machines, equipment, factories Things used in producing goods and services and getting them to consumers. Human Resources (Labor)– “mankind’s physical and mental talent” These are the skills people have that are used to produce goods and services. Entrepreneur – the individual who combines the factors of production in order to produce a good or service. Risk taker, policy maker, and innovatorTRANSCRIPT
Introduction to EconomicsJohnstown High School
Mr. Cox
Production
Introduction to ProductionWhen thinking about Supply and Demand,
a critical component that must be understood is the costs and operations behind producing goods.
Inputs – resources; materials needed to produce an..
Output - quantity of goods or services produced in a given time period, by a firm, industry, or country (i.e. finished goods)
Resources – Factors of ProductionNatural resources (Land)– “free gifts of nature”
Land, minerals, oil, forests, air, and timberCapital Resources – “manufactured aids to
production”Tools, machines, equipment, factoriesThings used in producing goods and services and getting
them to consumers.Human Resources (Labor)– “mankind’s physical and
mental talent”These are the skills people have that are used to produce
goods and services. Entrepreneur – the individual who combines the
factors of production in order to produce a good or service.Risk taker, policy maker, and innovator
Circular flow of income and output
What does the circular flow model show us?Why is a relationship between the factor
market and the product market necessary for the economy to stay strong?
What are the bean bag firms inputs? Workers and materials
(cloths, thread, and beans)
What is the basic question that a business owner has to answer in regards to labor?
How many workers to hire?
Do more workers always mean an increase in output? Explain. No, at some point
output drops (not enough capital)
What is Marginal Product of Labor?
Change in output from hiring one more worker
What is the marginal product of labor for the second worker?
6 (up from 4)1st=4 2nd=10
Why does that second worker add more to output than the first? Start to
specialize jobs
CookWaiter
Dishwasher
At what point does the marginal product of labor start to decrease?
Why?-Not enough to do
The 4th worker
Not enough tasks (only 3) so people with down time.
What is capital?
Humans made resource that is used to produce other goods.
What is the factories capital?
Sewing machine and pair of scissors
What happens to product of labor if a factory hires way too many people?
Marginal product of labor goes negative
What are the two categories of costs?
Teachers Salary
*Salary
All Others
*Hourly
Fixed and variable
What is Fixed Cost?
Cost that doesn’t change
What does it involve?
Give a few examples.Rent, machine repairs, property taxes, and salaries
Product facility, building and equipping factory, office
Store or restaurant
What is Variable Cost?
Costs rise and fall depending on quantity produced
What do they involve?
Give a few examples.
Raw materials and some labor
Labor-# of workers change, electricity, and heating
Labor
What are its variable costs?
Workers
Fabric
Beans
What do you get when you add the two costs?
Total costs
What is Marginal Revenue? Additional income from
selling one more unit
What happens to the marginal revenue when the 11th bean bag is produced?
Stays the same
No gain is made
Next one will take from profits
T/F The company would be better off producing less and keeping its costs down.
True, more economical
Should a factory losing money continue to produce goods and lose money?
Yes, will lose less $ then being shut down and losing fixed costs
Fixed cost still have to be paid(rent, loan, etc…)
Graphing Production PossibilitiesThe Production Possibilities Frontier (PPF)
is a graph that shows all possible combinations of two goods when an economy is producing at full potential.It does not actually show reality, since it
assumes only two goods are produced.It is a simplification that shows what sort of
trade-offs would be made in reality.It only shows what can be produced – not
what would be consumed.
PPF for the Country
Guns
Butter
A point on the graph represents how much of each item is being produced.
800
800
PPF for the Country
Guns
Butter
The frontier shows the limit of what can be produced – all possible combinations when all resources are fully utilized.
PPF for the Country
Guns
Butter
1500
All resources are being used to produce guns.
PPF for the Country
Guns
Butter
1500
2000
All resources are being used to produce butter.
Usually a point is chosen where both items are being produced:
PPF for the Country
Guns
Butter
1100
1500
Production may occur anywhere on or within the frontier.It may NOT occur beyond the frontier–
there are not enough resources to do so.
PPF for the Country
Guns
Butter
AAt point A (and at any point on the frontier), production is EFFICIENT.
Efficient production means that all resources are being fully employed to produce the most goods and services possible.Therefore it is impossible to produce more
of one item without producing less of the other.
PPF for the Country
Guns
Butter
B
At point B (and at any point inside the frontier), production is INEFFICIENT.
Inefficient production means not all resources are being fully employed – it is still possible to increase production of both goods.
This could occur during a recession or depression, or in a developing country.
The PPF can be used to show tradeoffs.Any two or more points on the frontier
represent tradeoffs.
PPF for the Country
Guns
Butter
A
B
A and B represent tradeoffs. A produces more guns, B produces more butter.
The PPF can be used to show the opportunity cost of choosing one alternative over the other.
PPF for the Country
Guns
Butter
A
B
1400
800
1700600
The opportunity cost of A equals the decrease in butter: 1100 units.
PPF for the Country
Guns
Butter
A
B
1400
800
1700600
The opportunity cost of B equals the decrease in guns: 600 units.
The PPF can also show economic growth by moving outward.This may occur due to additional resources,
increasing population, or new technology.
PPF for the Country
Guns
Butter
Growth
ReviewAny point on the graph shows how much of
both goods is being produced.Efficiency is shown by whether the point is on
the curve (efficient) or within the curve (inefficient).
Tradeoffs are shown by any two points on the curve.
Opportunity cost is shown by the decrease in one good when the other is increased.
Growth is shown by the frontier moving outward.
Production Possibility Graphs
Graphing the documentary “Broke…”
https://www.youtube.com/watch?v=va2qj4Zv4QM
Production Possibility Graphs Decide which goods and services to examine from the film.
The film will outline the choices made by some professional athletes. You will select and highlight some of those choices.
A represents all of one choice, B represents all of another choice. A will be the choice they made, B will be another choice either stated they
could have made, or one you think they could have made. Your graph will have a description of the following terms in
regard to the film:1. Production Possibility Frontier – the connecting line between A and B.2. Trade-offs – differing choices made because resources are scarce.3. Efficiency – using resources in such a way as to maximize production.4. Underutilization – using fewer resources than the economy is capable of
producing.
Define these terms from “Broke…”Sudden Wealth Effect…Draped…Bling Bling…How much for a “Grand Slam Package?”Three examples of “Mo Money, Mo
Problems…”
Class discussion questions for the documentary “Broke”1. Describe the premise of the documentary.2. List the problems incurred and described by the
athletes.3. What are the root issues with these athletes? Are
the stories they tell the problem, or are they the symptom?
4. Do other socioeconomic levels experience similar issues on differing scales? Why or why not?
5. How could the problems be handled differently?6. Could seniors in high school put themselves into
this situation on a relative scale?7. How can you prevent this in your life?