Introduction Warm Up

1 What are some products and services you’ve bought in the last week?

2 What are some natural resources that are scarce? Would the answer be different if you lived in another place like a desert or in the Arctic?

3 Have you ever traded with someone? Why did you make the deal?

Unit 1: What is Economics?• A study of choices people make to satisfy their wants

and needs.

• Economic actors– Consumers – Buyers– Producers – Make goods and services and sell them

• Goods are physical products; services are actions

What do you want to buy? How do you get your money?Should you go to college?

What are some examples of goods? Services?

Two Categories of EconomicsMicroeconomics Macroeconomics

Study of economic choices made by individuals, households, and businesses.Examples: Microsoft’s profits,Your family’s budget, or what you decide to buy for lunch.

Study of economic activityin an entire economy(regions or countries).Examples: UnemploymentIn the U.S. or the povertyrate in Houston, Texas.

Warm Up Quiz

Decide whether the following are examples of Microeconomic concepts or Macroeconomic concepts:1 . Juan decides to buy a pair of jeans instead of Astros tickets with his $50.

2. France’s unemployment rate has been steady over the last 10 years.

3. Interest rates in the U.S. have decreased dramatically because of the recession.

4. Toyota has decided to spend a significant amount of its companies budget on the development of fuel efficient vehicles.

Man-made items used to produce goods•Machinery •Money•Tractor•Factory

People who take risks tomake new products or start new businesses•Henry Ford•Bill Gates•Sam Walton

Physical or intellectual effort to make products•Assembly-line workers•Ministers•Grocery clerks•Pizza delivery dude•Carpenter

Provided by nature•Sunlight•Oil•Water•Corn

Warm Up Quiz• What are the four types of resources (factors

of production)? List at least 2 examples for each type of resource.

• Possible answers:– Natural – water, soil, apples– Capital – machinery, equipment, money– Human – doctor, teacher, construction worker– Entrepreneurship – Henry Ford and his assembly

line concept or any business owner who takes a risk bringing products to markets

Warm Up Quiz• List resources that are used in the production

of pizza—list a resource from each of the 4 types of resources (Human, Natural, Capital, and Entrepreneurship).

• Possible answers:– Human – cooks and delivery dudes– Natural – wheat, milk (cheese), tomatoes– Capital – ovens, delivery cars, restaurant building– Entrepreneurship – opening restaurant, Papa John

What is this picturing indicating?

How does this represent scarcity?

Unlimited Needs and

Wants

Limited Resources

Scarcity

Choices and Allocation

WHAT to

produce

HOW to

produce

WHO receivesgoods

Productivity – Level of output that results from a level of input

• Allocate – How resources are used or distributed

• Efficiency – Smallest amount of resources that produce the greatest amount of output

• Specialization – focusing on a single task to gain expertise• Division of Labor – Workers specialize on one or a few tasks

so that they can maximize productivity– Example: Assembly line worker that puts the steering wheel in a car

Why is it better that this worker specializes on one task rather than making the whole car?

Discussion Question

• How much should a nation take the environment into consideration as it consumes resources in the production process?– Consider: pollution, urban sprawl into natural habitats,

health issues and the over-usage of non-renewable resources

• Rank the following in order of most preferred to least preferred – Astros Tickets– Texans Tickets– Rockets Tickets– Dynamo Tickets

After you make your choice, you can only have one. Therefore, your #1 item becomes your PURCHASE; #2 item becomes your OPPORTUNITY COST; and items #3 & #4 are just other TRADE-OFFS or SACRIFICES.

Let’s assume I chose:#1 Texans #2 Rockets#3 Dynamo#4 Astros

Then…Texans = PurchaseRockets = Opportunity Cost

Production Possibilities Curves (PPC)

These assumptions keep the economy’s level of output on the PPC

Using all of our resources, to get some pizza, we must give

up some robot arms!for example...

What if we could only produce ...10,000 Robot Arms

or

400,000 Pizzas

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

graphical formR

ob

ots

(th

ou

san

ds)

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

graphical formR

ob

ots

(th

ou

san

ds)

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

Ro

bo

ts(t

ho

usa

nd

s)

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

graphical form

Ro

bo

ts(t

ho

usa

nd

s)

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

graphical formR

ob

ots

(th

ou

san

ds)

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES

PIZZA 0 1 2 3 4(in hundred thousands)

Robots 10 9 7 4 0(in thousands)

in table form

graphical formR

ob

ots

(th

ou

san

ds)

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES

At any point in time, a full-employment, full-production economy must sacrifice some of product X to obtain more of product Y.

PRODUCTION POSSIBILITIESLimited Resources meansa limited output...

Q

QQ

Ro

bo

ts (t

ho

usa

nd

s)

Pizzas (hundred thousands)

1413121110 9 8 7 6 5 4 3 2 1

1 2 3 4 5 6 7 8

A B

C

D

E

W

Attainablebut

Inefficient

Unattainable

Attainable& Efficient

PRODUCTION POSSIBILITIES

Q

Q

Ro

bo

ts (t

ho

usa

nd

s)

Pizzas (hundred thousands)

1413121110 9 8 7 6 5 4 3 2 1

1 2 3 4 5 6 7 8

A B

C

D

E

W

Attainablebut

Inefficient

Unattainable

Attainable& Efficient

PRODUCTION POSSIBILITIES

QQ

QQ

Ro

bo

ts

Ro

bo

ts (t

ho

usa

nd

s)(t

ho

usa

nd

s)

Pizzas Pizzas (hundred thousands)(hundred thousands)

14141313121211111010 99 88 77 66 55 44 33 22 11

1 2 3 4 5 6 7 81 2 3 4 5 6 7 8

A B

C

D

E

W

Attainablebut

Inefficient

UnattainableUnattainable

AttainableAttainable& Efficient& Efficient

PRODUCTION POSSIBILITIES

Production PossibilitiesGraphing Quiz

Guns (in thousands)

Roses (in thousands)

0 800

30 700

60 500

80 300

90 0

Gun

s(in

thou

sand

s)

Roses(in thousands)

Graph the information from the table above

Label the axes withnumbers sequentially.In other words, use 20,40, 60, 80, 100 for roses.Don’t label the given numbers unless they are already given sequentially.

A

B

C

D

E

Money – Any item accepted in return for goods or services.Ancient societies used gold, salt, oreven shark teeth.

Barter – Exchangeof a good or service for anothergood or service.

Credit – Allows consumerto use items before completing payment for

the merchandise.

Economic Systems

Capitalism Communism

Capitalism is often referred to as the “Free-Market System” because people make decisions about what to produce, buy, and sell.

Communism is a “Command” economy.The government decides what is produced and at what price.

4 Types of Economic Systems

• Each society makes decisions about what goods to produce, how to produce goods, and who will get them.– Traditional – Decisions are based on the old customs of the

society. Tradition determines the answers to the 3 economic questions.

– Command – Government officials control the economy and decides what, how, and for whom to produce.

– Market – Individuals answer the 3 economic questions. People can open their own business, decide what to buy and sell, and own private property.

– Mixed – All countries are really a mixture of the above economies.

Mar

ket

Comm

andMixed

In reality, no country is 100% Market or Command—every country has elements of both. Countries that enjoy free markets fit into the Capitalism arrow; countries that are heavily controlled by government central planning fit into the Command arrow.

Place the countries into either the Capitalism or Communism arrow.U.S. / North Korea / China / France / Japan / Cuba / Germany

Capitalism• Self-interest – the impulse that encourages people to

fulfill their needs and wants. – Capitalism works because people help everyone else when they

attempt to satisfy their own wants. Example:When people work to meet their own needs, self-interest acts as an “invisible hand” that also leads them to do what is best for society.

- Adam Smith

The U.S. Free-Enterprise SystemThe foundations of the

Market system

Economics Systems Warm Up Quiz

• In which system does the government maintain the least control over economic resources?

• In which system are the economic decisions about what to produce determined by cultural customs?

• Adam Smith refers to “self-interest” as what?• List 2 countries with Command economic systems

and 2 countries with Market systems?