9780199129591

1Unit 1.1

1.1 The basic economic problem (1)

Resources Visual aid handout H1: Survival

Key concepts Scarcity of resources

Needs and wants

Objectives Define the nature of the economic problem (limited resources and unlimited wants)

Introduction (20 minutes) This is an activity to introduce students to some of

the key issues and problems that economics is concerned with and therefore what they will be studying during their course.

Start by asking what students already know about economics and what they think its study may cover. List their key points on a blackboard, whiteboard or overhead projector at the front of the class.

Alternatively, and if students are reluctant to give their own ideas, ask them whether they think studying economics will help them to analyse the following questions:

{{ What will happen when natural minerals and ores such as oil, zinc, copper and aluminium eventually run out?

{{ Why do food and energy prices keep rising but the prices of large-screen televisions keep falling?

{{ Why do we need to pay taxes?

{{ Why do famous footballers such as David Beckham earn more than most doctors?

{{ Why is there unemployment?

{{ Why cant all education and health care be provided for free?

{{ Why is electricity more expensive during the day than overnight?

{{ Why are some countries so poor and why cant richer countries give them more money?

In addition to the above questions or as an alternative, ask students whether or not they think their studies will cover the following areas and why.

What is economics about?

Why?

money? We use money to make payments; we earn it when we work; we pay taxes with it; we save it or invest it; firms earn it from the sale of goods and services; we exchange it for other currencies

business? Firms supply goods and services; they provide employment and pay incomes; they invent newproducts

how products are made?

Production uses up scarce resources; it can pollute the environment; some methods of production can cost more than others

the environment? The environment can provide natural resources; it can be damaged by economic activity; government may introduce laws to protect it from some economic activities

the jobs peopledo?

People in work produce goods and services; they are paid wages; several factors determine their wages and their choice of occupations; if there are insufficient jobs there will be unemployment

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Continued...

2 The basic economic problem: choice and the allocation of resources

people and population?

People produce and consume goods and services; they supply their labour; they own land and other resources; they run businesses

governments? Governments determine economic policies, spend money, employ people, raise taxes, set interest rates, introduce laws that affect our behaviour

international trade?

International trade involves the movement of goods, services, labour and money across borders; it allows countries to sell more products; it provides us with a greater variety of products, etc.

Add and discuss more questions or areas depending on the ability of the students and how much time you wish to devote to this introductory task. Then move on to the next exercise to introduce the fundamental problem that the study of economics is concerned with.

Activity: Survival (40 minutes) The purpose of this exercise is to provide a brief

introduction to the basic economic problem through the concepts of human needs and scarcity of resources. In the next lesson human needs for survival will be contrasted with human wants.

Divide the class into groups of four or five students. Display handout H1 on an overhead projector or distribute copies to each group to explain their situation and objectives.

Allow students 1520 minutes to discuss in their groups and to list what items they think they will need, what they will need to do to survive on the island, and what problems they might encounter, notably a lack of resources including relevant skills.

At the end of the exercise ask a member of each group to read out what the groups members agreed. These

can be listed at the front of class. Responses from each group should be similar: identifying the need to grow, gather or hunt sources of food, collect water, gather wood to produce fire for warmth and cooking, make clothing from animal skins or the wool from sheep, build shelters from the cold and thunderstorms, and develop some way of communicating their presence on the island to any passing ships or aircraft.

Some groups responses may include items such as medicines, music or mobile phones, but these can be quickly ruled out as non-essential for human survival or, in the case of medicines, as not available on the island.

The need to gather materials to make tools, spears and pots etc. to assist with farming, hunting, collecting water and building shelters, may initially be overlooked by some students. Asking them how they will catch fish, store and carry water or build huts and other shelters will help them to focus. Additional questions might include: How many people knew how to build shelters or to make pots, spears and clothing etc.? Were there enough suitable materials on the island for these purposes? How were decisions made and tasks allocated?

This activity can be extended to consider resource allocation decisions when combined with Activities 2.1 and 2.2 on pages 23 and 24 of the textbook. See also Unit 2.1 (Economic systems - lesson 1).

Key point summary Human needs are things that are essential for

human survival.

However, resources are scarce and it may not be possible for every person to obtain all the things they need in order to survive.

Next lessonIn the next lesson we will consider:

How scarcity of resources not only prevents many people from satisfying their basic needs, but also prevents everyone in the world from satisfying all their wants.

3Unit 1.1


Resources Visual aid handout H2: Drought in Africa

Visual aid handout H3: What's the problem?

Key concepts Scarcity

Needs and wants

Objectives Define the nature of the economic problem (limited resources and unlimited wants)

Discussion: Drought in Africa (20 minutes) Read out to students, or ask them to read, the

article on the Somalia Famine dating from 2011 on handout H2. The article can usefully reinforce concepts developed and learned from the first lesson in the exercise on survival.

Students should be asked to consider whether the needs of the people in the photographs and described in the article are being met. If not, why not?

Students should recall from lesson 1 that basic human needs for survival include food, water, basic clothing and shelter. These are clearly scarce in the situation described in the article.

Some students may focus on the need of many of the people depicted or described for medical help. This view can be challenged by asking students: Would as much medical assistance be required if the people in the article had sufficient food, clean water, clothing and shelter?

The main cause of scarcity identified in the article is the lack of rainfall leading to crop failure, farmed animals dying and increasing malnutrition. However, the discussion may be widened to consider why water could not be pumped from other areas of Africa unaffected by the drought, or why the people could not buy the food, water and other supplies they needed from nearby shops. Concepts such as relative and absolute poverty, inequality, lack of infrastructure, stage of economic development, and population growth might also be briefly introduced during the discussion.

Conclude the discussion by identifying, from the article, the underlying problem of concern in the study of economics: scarcity of resources relative to our human needs and wants. But emphasise that it is a problem that affects every person in every country to a greater or lesser extent and not just the poorest people in the least developed countries.

Discussion: Whats the problem? (10 minutes) There is a risk that some students, in this and the

previous lesson, may have concluded that the problem of scarcity only affects the poorest of people and the least developed countries, and that it is not a problem in rich countries such as the USA, Canada or Germany.

Handout H3 can be used briefly to demonstrate thatscarcity of resources is widespread and affects every country.

Activity: Human wants (30 minutes) Introduce the concept of human wants for different

goods and services using Activity 1.2 (page 7) and/or Activity 1.3 (page 8) from the textbook. Or ask students to each suggest at least two products they really want and then list these at the front of the class. They should be informed initially that their desires are not constrained by a lack of money. A long list should therefore develop very quickly.

Following the exercise ask students to explain how human wants (things we would like to have because they give us pleasure or satisfaction) differ from human needs (the essential things we need to survive).

Students may quickly understand that they cannot satisfy all their wants because they do not have enough money. It is therefore important to widen the discussion and their understanding of scarcity, for example, byraising some of the following questions:

{{ What if everyone in the world all wanted the same things as the students or even more?

{{ Could absolutely everything everyone wanted be produced?

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{{ Are there enough raw materials, labour, machinery, factories and other resources in the world to provide all the things that people want?

{{ As the global population grows (from 7 billion now to a predicted 9billion by 2050) what will happen to the total of our needs and wants?

Key point summary We need basic foodstuffs, shelter, clothing and

clean water to survive.

In contrast, our wants for other goods and services are without limit.

Scarcity of resources relative to human wants is a global problem: there are just not enough resources in the world to satisfy all our wants.

In some countries resources are so scarce even the basic needs of some people cannot be met.

Our needs and wants will continue to grow as the world population increases.

Because there is scarcity of resources we must all make choices about how best to use them, i.e. what goods and services to make with them and therefore which needs and wants to satisfy.

Next lessonIn the next lesson we will consider:

Production, consumption and the cost of makingchoices.


Resources Visual aid handout H4: Whats in a car?

Visual aid handout H5: The next best thing?

Key concepts Production and consumption

Factors of production

Scarcity and choice

Opportunity cost

Resource allocation

Objectives Define the factors of production (land, labour, capital, and enterprise)

Define opportunity cost and analyse particular circumstances to illustrate the concept

Evaluate the implications of particular courses of action in terms of their opportunity cost

Introduction (15 minutes) Brief reminder of the last lesson.

Introduce the concept of production: using resources (inputs) to make and deliver goods and services (the products or outputs of production processes) tosatisfy our needs and wants. Entrepreneurs are people who organize production in organizations called firms.

Introduce the concepts of consumption and consumers: people and organizations that use up goods and services to satisfy their needs and wants. List some examples: when we eat bread we are

satisfying our need for food; when we eat cakes we are satisfying our wants for a sweet tasting treat; when we buy and listen to a music CD or download we are satisfying our want for entertainment, etc. Consumption therefore involves using up goods and services.

The main problem is that there are not enough resources to produce everything we need and want. Every society must therefore choose how best to allocate its resources: what goods and services to produce and which needs and wants to satisfy.

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5Unit 1.1

Activity: Whats in a car? (15 minutes) Use handout H4 to demonstrate just some of the

resources used up in the production of a car. Introduce the concept of factors of production (scarce resources used up in the production of goods and services). Ask students to classify the resources listed on handout H4 as land (all natural resources), capital (man-made resources) or labour (human effort). At the front of the class, list separately or use a different colour pen to identify the resources listed on handout H4 as either land, capital or labour.

Following the exercise, introduce the concept of enterprise (the ability to organize resources into firms to produce goods and services a skill possessed by entrepreneurs).

Alternatively, or as a homework activity, ask students to complete Activity 1.1 on page 6 of the textbook.

Discussion: Opportunity choice (30 minutes) Students should by now understand that, because

resources are scarce relative to our wants, we must decide how to best to use them. Thisinvolves choosing between alternative uses what goods and servicesto produce and, therefore, which needs and wants will be satisfied. Economics is concerned with these choices how individuals, firms and governments make them and the consequences of their decisions.

For example, the resources used to produce cars from the previous activity could be used instead to produce other goods and services. However, if some of the resources are moved or reallocated to the production of other products, such as computers, then fewer cars will be produced. More computers will mean fewer cars are available for people to consume. The loss or sacrifice of cars is the true cost of the decision to make more computers.

Use handout H5 to introduce the concept of opportunity cost. Stimulus questions to prompt discussion might include:

{{ What is the economic problem in each of the articles?

{{ For each decision described in the articles, what is being sacrificed andwhy?

{{ Who are the winners and who are the losers from these decisions?

To reinforce concepts explored in the lesson, students can complete Activities 1.4, 1.5 and/or 1.6 from the textbook (pages 1112) as a class exercise or as homework.

Key point summary Production uses up resources to make and deliver

goods and services to consumers to satisfy their needs and wants.

Consumption is the use of goods and services by consumers to satisfy their needs and wants.

Resources used in the production of goods and services are known as factors of production.

Entrepreneurs organize resources into firms to produce goods and services (or products these are the outputs of productive activities).

Because resources are scarce relative to human wants, all societies must choose how to allocate them between different uses: what goods and services to produce and which needs and wants to satisfy. Not all needs and wants can be satisfied.

Reallocating resources, therefore, always involves an opportunity cost in terms of what we have to give up in return.

Opportunity cost is the cost of choosing between alternative uses ofresources. Choosing one use will always mean giving up the opportunity to use resources in another way.

Next lessonIn the next lesson we will:

Remember what has been learned so far about the basic economic problem

Demonstrate resource allocation decisions and opportunity costs using production possibility curves or frontiers.



Resources Slide presentation S1: The basic economic problem

Worksheet 1

Key concepts Factors of production

Production and consumption

Resource allocation

Scarcity and choice

Opportunity cost

Production possibility curves (PPCs) or production possibility frontiers

Objectives Demonstrate how production possibility curves (PPCs) can be used to illustrate choice and resource allocation

Slide presentation: The basic economic problem (30 minutes) Use slide presentation S1 to revise and reinforce the

concepts learned in lessons 13, and to introduce PPCs as a simple way of illustrating choice and resource allocation.

The slide presentation reproduces the PPC diagrams from page 13 of the textbook. The first diagram shows how if all resources are devoted to the production of cars, then the maximum number of cars that can be produced each week is 100. Alternatively, a maximum of 120 trucks can be produced each week with the same resources. Increasing the output of one product means sacrificing more of the other.

Students can be introduced to the concept of efficiency: if some resources are left idle or if production is inefficient, then an economy will fail to produce as much as it could with its available resources. Fewer goods and services will be available, fewer needs and wants will be satisfied and living standards or economic welfare will be lower than they could otherwise be.

Other combinations of products can be used to illustrate opportunity costs using PPCs instead of those in the slides. Examples are a hospital choosing between different treatments; students deciding how to allocate their time between economics revision or leisure; a government choosing between building more schools or more roads.

Worksheet 1 (30 minutes)Students can consolidate their learning by completing Worksheet 1 in class and/or as homework.

Key point summary The most efficient allocation of scarce resources will

be the one that satisfies the most needs and wants it possibly can. It will maximize economic welfare from available resources.

A PPC can be used to demonstrate opportunity cost and the most efficient allocation of resources between competing uses in a simple diagram. Moving along a PPC means more of one product will be produced but at the expense of another or all others.

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Brian Titley 2012: this may be reproduced for class use solely for the purchasers institute

H1 Survival 1.1 The basic economic problemH2 Drought in Africa 1.1 The basic economic problem

Somalia Famine: Dadaab Refugee Camp In Kenya at More Than Four Times Capacity

Faduma Sakow Abdullahi and her five children tried to escape starvation in Somalia by journeying to a Kenyan refugee camp. Only one day before they reached their destination, her four-year-old daughter and five-year-old son died of exhaustion and hunger.

She saw more than 20 other children dead or unconscious abandoned on the roadside. Eventually a passing car rescued the rest of her family from what could have been death.

I never thought I would live to see this horror, she said, tears rolling down her cheeks as she described the 37-day trek to Dadaab, the worlds largest refugee camp.

Presently about 1,300 people arrive at Dadaab from Somalia each day in search of food, water, medical help and shelter. There are now more

than 42,000 of the newly arrived refugees waiting outside the camp boundaries because there is nowhere to fit them inside. Dadaab was originally built for 90,000 people but more than 382,000 are now here.

Tens of thousands of Somalis have watched their land dry up after years without rain. Then their livestock died. Finally all the food ran out. Now they are making the perilous journey over parched earth to refugee camps in Kenya and Ethiopia, regions that also have been hit hard by drought.

The World Food Program estimates that at least 8.8 million people in Somalia, Djibouti, Ethiopia, Kenya and Uganda have been affected by the drought and will need food aid.

912959_Complete_Economics_TRK_1Handout2Slide05Slide06

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