Bellwork: Monday, May 6

1. Let’s say you are going to BUY candy at the concession stand. Would you want the price of candy to be higher or lower? Explain.

2. Now let’s say you are SELLING candy at the concession stand. Would you want the price of candy to be higher or lower? Explain.

Economic Basics

What are the Basics of Economics?

• Economics is the study of how people meet their wants and needs.

• People must answer three basic economic questions:

1. What goods and services should be produced?

2. How should goods and services be produced?

3. Who uses or consumes those goods and services?

Factors of Production

• The resources used to make goods and services are called factors of production:

1. Land: The physical location and resources available.

2. Labor: The people and machines that make the goods and services.

3. Capital: Money, wealth, or assets invested in a business.

• Watch: https://www.youtube.com/watch?v=7c4NRcKDrzw

• Question: What factors of production would be involved in starting a farm? Turn and talk to a neighbor to brainstorm.

Factors of Production: Farm

• Land: • Flat, open land with good soil.

• Climate that is warm, sunny, and wet enough to have a growing season.

• Labor: • Workers to help tend the crops and care for the animals,

and will load your products into trucks to sell in markets.

• Capital: • Money to buy land and equipment.

• Machines, like tractors, plows, and combines to help.

• The barn and all the tools in it.

Making Choices

• There is no limit to the things we want, but there is a limited to what can be made.

• Scarcity is when you have a limited amount of resources, but people have unlimited wants.

• People have limited time and money, so they have to choose what they want most. Sometimes, that means giving up something you want to get something you really want (or need).

• The opportunity cost is the cost of what you have to give up to get something else.

Making Choices

• Brainstorm: • What are some examples of things you really want or

need

• What are some things that you might not be able to get, so that you have enough money to buy the things you really want or need?

• Watch: https://www.youtube.com/watch?v=NwOYLV-L7pc

Supply and Demand

• Demand is the desire for a certain good or service, (how many people want it). • When prices go UP, demand goes DOWN (fewer people

are willing to buy expensive goods)

• When prices go DOWN, demand goes UP (more people are willing to buy cheaper goods)

• Supply is the amount of a good or service that is available for use (how much there is to go around). • When prices go UP, supply goes UP (sellers make more

goods because they will make more money)

• When prices go DOWN, supply goes DOWN (sellers make fewer goods because they will make less money)

Market or Equilibrium Price

• When the price of a good is just right, supply will equal demand. That means sellers will sell enough of the good so that everyone who is willing to buy one is able to.

• This is called market price, or sometimes the equilibrium price.

• Watch: https://www.youtube.com/watch?v=2Wp-diDRVKI

Supply and Demand Graph • The graph shows

what happens to the supply and demand of chocolate bars as the price changes.

• Notice how when the price of the chocolate goes UP, the supply (S) goes UP, but the demand (D) goes DOWN.

If you are selling chocolate bars, and the price is $0.40:

1. How many people demand them?

2. How many are you willing to sell?

3. How much money will you make?

When the Price is Low

If you are selling chocolate bars, and the price is $0.40:

1. How many people demand them? 500

2. How many are you willing to sell? 100

3. How much money will you make?

$0.40 x 100 = $40

When the Price is Low

If you are selling chocolate bars, and the price is $2.00:

1. How many people demand them?

2. How many are you willing to sell?

3. How much money will you make?

When the Price is High

If you are selling chocolate bars, and the price is $2.00:

1. How many people demand them? 100

2. How many are you willing to sell? 500

3. How much money will you make?

$2.00 x 100 = $200

When the Price is High

If you are selling chocolate bars, and the price is $1.20:

1. How many people demand them?

2. How many are you willing to sell?

3. How much money will you make?

When the Price is at Market/Equilibrium

If you are selling chocolate bars, and the price is $1.20:

1. How many people demand them? 300

2. How many are you willing to sell? 300

3. How much money will you make?

$1.20 x 300 = $360

When the Price is at Market/Equilibrium

Producers and Consumers

• Producers are people or businesses that make and sell products.

• Consumers are people or businesses that buy, or consume, products.

• You can’t have an economy without both. • People will have nothing to buy if there are no producers

to make things.

• Producers won’t make any money if there aren’t consumers to buy things.

Producers

• Producers want your business, so they try to offer you better products or lower prices than other companies.

• However, if the sale cost of an item is lower than the marginal cost (how much it costs to make the item), the produce won’t make it, because they will actually lose money.

Incentives

• An Incentive is a factor that encourages people to act a certain way.

• Money is a good incentive. • Producers make and sell products because they want to

make money.

• Consumers look for lower prices because they want to save money.