Do Now: What do you think this quote means?

“There’s no such thing as a free

lunch.”

1) Everything has a cost to it

2) The cost can come from you or someone else

3) The cost can be money, time, and the things you are NOT getting

What is Economics?1) The study of how people satisfy their

needs and wants through the choices that they make

2) Study of the production and consumption of goods and services

Includes: jobs/employmenttradebusiness/commercemoney (and how it is spent)

Needs vs. Wants

Need – basic requirement for survival

Needs can also be immaterial (love, acceptance, success)

Want – a means of expressing a need (Ex. Food is a need, Pizza is a want)

EVERYTHING ELSE that is not a need (ex: cell phones, cars)

Often, wants are advertised as needs(we think that our wants are things we need)

Is it a Need or a Want?

ResourcesGoods – something that can be touched

Services – work performed

However, there are a limited amount of resources available

The Basic Economic Problem

Unlimited Wants

Limited Resources

SCARCITY

ScarcityBecause of scarcity, people must make

choices on how to spend/distribute resources

1)WHAT to use the resources for

2)HOW to use the resources

3)WHO will have the resources

If you had a 25th hour, what would you do?

1st Choice

2nd Choice

All other choices

Opportunity Cost• What you are giving up (the cost of the

opportunity)• The value of the runner-up, the second

choice• It can be both positive and negative

1st Choice 2nd Choice All other choices

Opportunity Cost

Ex. You have $300

=

(Opportunity Cost)

All other choices are called trade offs

1st Choice 2nd Choice All other choices

Trade-off

H.W. Needs v. Wants & Opportunity Cost

Day 2: Do NowThree choicesWhich one would you pick and whyWhat is your 2nd and 3rd choice

What is your trade off?What is your opportunity cost?

Resources

We HAVE to make choices because of scarce resources!!!

The biggest problem is SCARCITY!!!!

Therefore- We have to figure out how to delegate our resources according to needs and wants!!

“Factors of Production”Something that is used to produce and

distribute goods and services

When all three are present, PRODUCTION can occur

1)Land- space/area- natural resources (wood, coal, oil)- limited supply

2)Labor- people to work/human resources- can vary through quantity of people and quality of workers

3)Capital - something used for production

Physical Capital: man-made resources used (tools, factories, machines)

Human Capital: Knowledge, skills and abilities workers gain through education and experience

PhysicalCapital

HumanCapital

4) Entrepreneurship• - leaders who decide how to combine Land, Labor

and Capital to make new or innovative goods and services

• - take risks to start new companies and develop new ideas

• - Invest their time and money to help the economy grow

Day 3: Monsters INCComplete worksheet on Factors of Production

Supply & Demand

The most important factor you consider before you buy a good or service

PRICE

Consumer (buyer): users of goods/services

Producer (supplier, seller): create, market, and sell goods and services

Market: The place where consumers and producers meet to determine the price of g/s and the amount of g/s that will be supplied

DemandThe AMOUNT of a product that consumers want to

BUY

Consumers must be willing and able to make the purchase in order for there to be a demand

Law of Demand Price Demand

=

If the cost is down, people will buy more.

Price Demand =

If the cost is up, people will buy less

Human Behavior That Causes Demand1) Substitution Effect :

As the price of a good goes up it becomes more expensive than other goods, causing people to choose the less expensive product

2) The Income Effect: When the price of goods/services goes UP we feel

POORER When the price of goods/services goes DOWN we

feel RICHER Even though you FEEL richer/poorer you real

income HAS NOT changed!

The menu for school lunch reads:Cheeseburger = $1.50 Slice of Pizza = $1.50

(Students usually buy about 500 cheeseburgers and 500 pizzas a day)

If the price of beef goes up then the price of Cheeseburgers will go up too.

Then the menu will change to:Cheeseburger = $2.50 Slice of Pizza = $1.50

(Students will then buy about 100 cheeseburgers and 900

pizzas a day.)

This change in spending = the Substitution Effect

As the price of gas goes up it becomes more expensive to fill our cars.

When gas was $1.00 a gallon, it cost $15 to fill my tank.

If gas goes to $4.00 a gallon, it will cost $60 to fill my tank.

That means I will drive fewer places in order to save my income.

SupplyThe amount of goods/services that a producer

makes available to sell

Law of Supply Price Supply

=

If the cost is up, companies will make more

(because there is more money to be made)

Price Supply =

If the cost is down, companies will make

less

So… Supply

Demand

=

*When something is not scarce, there is not a high demand for it•The opposite is also true

(Low supply = HIGH demand)

Surplus - When you have more supply than demand

Shortage – When you have less supply than demand

Equilibrium – When the supply and the demand are the same (equal)