ECONOMIC CHOICES AND DECISION MAKING Economics 1.1

ECONOMIC CHOICES AND DECISION MAKING

Economics 1.1

What is the fundamental economic problem ALL societies must face?

People’s Unlimited Wants

Society's Limited Resources

Resources- any available means for economic or political development

Want- something we would like to have but that is not necessary for survival

Scarcity

ThanksgivingPeople’s Unlimited

WantsSociety's Limited

Resources

What We Know We Know…I think

Fundamental Economic Problem

ScarcitySociety’s limited resources

Individual’s unlimited wants

Making Choices

AHHH… What do I do?

What we know:

We live in a world with relatively scarce resources, we need to make careful economic choices about how we use these resources.

“How do we do that ?” you ask.

Three Basic Economic Questions1.What to Produce?2.How to Produce?3.For Whom to Produce?

What to Produce?

Thanksgiving’s What to Produce?

Pumpkin Soup

Salad

Roasted turkey

Cranberry salad

Gravy

Mom’s stuffing

Mashed potatoes

Baked potatoes

Sweet potatoes

Green beans

Carrots

Squash

Rolls

Pumpkin pie

Condiments

What is a society going to produce? Military vs Education Food vs Housing Exports vs Keeping what they

produce for themselves

What are we going to produce?Food

How to Produce? Thanksgiving’s

How to Produce

Some food home grown (squash, onion, potatoes, and corn from my garden)

Some food made from scratch

Some foods bought ready made (rolls)

With machinery when possible

Slave labor (Devon and Jeremy)

Now that a society knows what they will be producing, now we can ask, “How are we (society) going to produce it?”

What to produce- FoodHow are we going to produce

it? United States- through corporate

farms, large machinery and limited chemicals

N. Korea- state owned farms, lots of laborers and lots of chemicals

For Whom to Produce?

Thanksgiving “For Whom to Produce”

My family

My peeps

Anyone else who has not tasted my cooking before and agrees to come over for Thanksgiving

Now that a society knows what they want to produce and how they are going to produce it, they ask the question, “Who are we producing for?” Who is going to receive what we produce?

What to produce- Food How are we going to produce it?

United States- through corporate farms, large machinery and limited chemicals

N. Korea- state owned farms, lots of laborers and lots of chemicals

For whom to produce? United States- locally, nationwide and world

wide N. Korea- the upper echelon of society and

than export all the rest of the food (have mass domestic famine/starvation for the general population)

What We Know We Know…I think

Fundamental Economic Problem

ScarcitySociety’s limited resources

Individual’s unlimited wants

Making Choices

What to produce?How to produce?For whom to produce?

Practice Time

Cuba is a nation/state island that lies off the coast of Florida. Cuba produces mostly exports which include: cigars, sugar, nickel, tobacco, fish, citrus, and coffee. Imports include food, fuel, and clothing. The government employs most of the workers in Cuba, and the workers are poorly paid and work on labor-intense farms tending to the country’s exports. In general, the people are poor and under nourished, as there is a food shortage. The countries exports give the government officials a lot of money and they live very well.

We’ve answered the questions,

now what?

What do we know:

1.We know that we have limited resources and unlimited wants which is scarcity , and every society needs to deal with it.2.We know the three economic questions that need to be answered.3.We’ve answered those questions so we have a plan of action.4.What do you do after you complete a plan of ACTION! 5.Now we ACT!! Now we can manufacture/produce.

I’ve got NO idea

4 Factors of Production

Now let’s get producing!!

In order to produce any product, all four factors, or elements contributing to a particular result or situation, must exist.

1.Entrepreneur2.Land3.Capital4.Labor

EntrepreneurA risk-taking individual in

search of profit (individuals or government)

Starter of a business Come up with new ideas or

inventionsThey normally organize the

other factors of production

Why are they important?

What do you think?

Create the new productsCreate the new businessesCreate new jobs

As an entrepreneur I’ve got my business plan and idea, now what do I need to do?

Whose the entrepreneur in the Thanksgiving situation (who’s the boss?)

ME!

LandGift of nature

ORResources that are used in the

final product- raw material

What is the land in my Thanksgiving scenario?

TurkeyPumpkinPotatoes (shift resources to make both baked and mashed- less of each)SquashCornEggs

Now that I have my business plan, willing to take a risk (entrepreneur) and I have bought my raw material or inputs (land), what do I do next?

Start to manufacture my product.With what? I don’t have any equipment.

Capital or Capital Good

What capital or capital goods do I have in my Thanksgiving scenario?

Oven

Spoons

Pans

Refrigerator

Tools, equipment, machinery, and buildings/factories used in producing the product

Anything you use in the manufacturing of the final product

Now that I have my business plan, willing to take a risk (entrepreneur),I have bought my inputs (land) and I have the tools and equipment to produce, (capital) what do I do next?

Labor

What labor do I have in my Thanksgiving scenario?

Jeremy

Devon

The people that work or produce for you, the entrepreneur

What We Know We Know…I think

Fundamental Economic Problem

ScarcitySociety’s limited resources

Individual’s unlimited wants

Making Choices

What to produce?How to produce?For whom to produce?

Start producing!

Four Factors of Production

EntrepreneurLandCapital/capital goodsLabor

o The person that takes the risk for the chance of making a profit

o The person who answers the three fundamental questions for her/himself

o Directs the other factors of production

Raw materials and inputs/ gifts of nature

Machinery and utensils to create the productThe workers with all of their efforts and skills

Practice Time

Economics and Economist

Economics is the social science that looks at how individuals, businesses, societies and government use their limited resources to satisfy their unlimited wants

Economists are the social scientists who study and look at how individuals, businesses, societies and government use their limited resources to satisfy their unlimited wants

“How do economists do that?” you ask.

The process is very “D A E P”

DescribeAnalyzeExplainPredict

1. Describe

Central/south America

Tourist

Women sell goods

Small stands

Produce and flowers

Scope of Economics

What do you observe? Fact finding, investigate, survey…. Gather as much raw data as you can

2. Analyze

Data showed 99% of the products that were for sale were produced by small family farms or cottage industries

Cottage industry is the production, for sale, of goods at home

There was a 5% jump in tourism since last year

Take all of the notes, surveys, data, raw data…. organize them and see what the numbers tell you.

Scope of Economics

3. Explain

Publish an article in a journal

Write a book

Lecture

Go on TV, You Tube…

Use social media to get my explanation across

Take what you have learned and tell other people.

Scope of Economics

4. Predict Since 99% of

economic activity comes from cottage businesses or small family farms, the introduction of corporate farming will be disastrous for the people in this region because they will be wiped out.

Because of the additional money spent on tourism advertisement, tourism was up 5% from last year. I recommend that you increase that expenditure and hit a larger geographical area to increase the amount of tourism in this area.

Once you have your analysis done and come up with the explanation, you can use that information to predict what the future will hold.

Scope of Economics

Practice Time

What We Know We Know…I think

Fundamental Economic Problem

ScarcitySociety’s limited resources

Individual’s unlimited wants

Making Choices

What to produce?How to produce?For whom to produce?

Start producing!

Four Factors of Production

EntrepreneurLandCapital/capital goodsLabor

o The person that takes the risk for the chance of making a profit

o The person who answers the three fundamental questions for her/himself

o Directs the other factors of production

Raw materials and inputs/ gifts of nature

Machinery and utensils to create the product

The workers with all of their efforts and skills

Scope of Economics

1. Describe2. Analyze3. Explain4. Predict