Scarcity and the Science of Economics We witness scarcity with
each years hot new product.
Slide 2
Scarcity: Condition where unlimited human wants face limited
resources. Effects almost every decision we make.
Slide 3
The study of how people try to satisfy wants with scarce
resources. Economics is about scarce resources, consumption and
production. How many "economic elements" can you identify in the
picture above?
Slide 4
Need: Required for survival. Want: Desired for
satisfaction.
Slide 5
Because resources are limited, virtually everything we do has a
cost. Someone has to pay for production TINSTAAFL Why do you think
scarcity is an issue with the rich as well as the poor?
Slide 6
What To Produce: A society must choose based on its needs. How
To Produce: Society must choose based on its resources. For Whom to
Produce: Society must choose based on its population and other
available markets.
Slide 7
Land: Limited natural resources not created by humans (climate,
fresh water, vegetation, minerals, animals) Capital: Means by which
something is produced (money, tools, equipment, machinery, and
factories).
Slide 8
Labor: Workers who apply their efforts, abilities, and skills
to production. Entrepreneur: Risk-takers who combine the land,
labor, and capital into new products.
Slide 9
When all the factors of production are present, PRODUCTION, or
the process of creating goods and services, takes place.
Slide 10
Describes economic activity- Gross Domestic Product (GDP),
unemployment rate, government spending, tax rates Analyzes economic
activity and answers the whys and hows-why prices go up and down,
or how do taxes affect savings.
Slide 11
Economists offer an explanation of the economy and its
activities to the societys population. Prediction: We want to know
whats around the corner to better prepare ourselves for the
unknown. Will prices rise or fall? Will income increase or
decrease? Economics is a social science because it looks at the
decisions people make and how they react to those decisions.
Slide 12
Basic Economic Concepts 20% of the worlds people who live in
the wealthiest nations consume 86% of the worlds goods and
services. The 20% who live in the poorest nations consume only
1.3%
Slide 13
Goods: Item that is economically useful or satisfies an
economic want. Consumer good: Intended for final use by individuals
Capital goods: Manufactured goods which are used to produce other
goods and services. Ex.? Durable goods: Any product that lasts
longer than 3 years when used on a regular basis. Ex? Nondurable
goods: Any product that lasts less than 3 years when used on a
regular basis. Ex?
Slide 14
Services: Work that is performed for someone and intangible.
Consumers: A Person who uses goods and services to satisfy wants
and needs. Why do you think the U.S. has been described as a
society of consumption?
Slide 15
Value: A worth that can be expressed in dollars and cents.
Scarcity by itself is not enough to create value. For something to
have value, it must also have utility.
Slide 16
Utility: Provide satisfaction, which varies with the needs and
wants of each person.
Slide 17
The accumulation of goods that are tangible, scarce, useful,
and transferable from one person to another. A nations wealth is
comprised of all items, including natural resources, factories,
etc. Does not include services!!
Slide 18
Adam Smiths 1776 book, The Wealth of Nations, referred
specifically to the ability and skills of a nations people as a
source of its wealth. Advocated a free market economy as more
productive and more beneficial to society. Comments?
Criticisms?
Slide 19
Wealth that is generated by the economy is made possible by a
circular flow of economic activity.
Slide 20
Factor Markets Individuals earned income Focus on the four
factors of production: land, labor, capital, entrepreneurship
Product Markets Individuals spending place Focus on goods and
services
Slide 21
Slide 22
Measure of the amount of output produced by a given amount of
input within a certain time Productivity increases with efficient
use of scarce resources.
Slide 23
May improve productivity because they lead to more proficiency
(and greater economic interdependence)
Slide 24
Economic Growth: Depends on high productivity An economys
productivity may be affected by
Slide 25
We rely on others, and others rely on us, to provide the goods
and services that we consume.
Slide 26
Catch a man a fish, and you can sell it to him. Teach a man to
fish, and you ruin a wonderful business opportunity.
Slide 27
Alternative Choices when making economic decisions
Decision-making grid lists the adv./disadv of each choice.
Criteria:How to spend my $50 gift card?!? AlternativesCost
$50Durable?Will parentsFuture expenseCan use or less?
approve?unnecessary?anytime? Several CDsyes no Concert Tixno MP-3
playeryes no Hackey sackyes noyesno Jeansyes
Slide 28
The cost of the next best alternative among a persons choices.
The cost may be the money, time or resources a person gives up, or
sacrifices, to make his/her final choice. Discussion Question: What
are some important economic decisions you will be facing within the
next 5 weeks? 5 months? One year? Five years?
Slide 29
Diagram illustrating the concept of opportunity cost. It shows
the various combinations of goods and/or services an economy can
produce when all productive resources are fully employed.
Identifying possible alternatives allows an economy to examine how
it can best put its limited resources into production. Considering
different ways to fully employ its resources allows an economy to
analyze the combination of goods/services that lead to maximum
output.
Slide 30
50 units of butter will only cost 30 units of guns 120 units of
guns will cost 50 units of butter Between pts A & B exists a
near equal trade-off, which means a competition for resources
Slide 31
Opportunity Costs: Expressed in terms of trade-offs, or in
terms of things given up to get something else The Cost of idle
resources: If some resources are not employed, it is difficult for
any company, nation, or individual to reach its true potential
Economic Growth: Any increase in resources and/or productivity
causes the production possibilities frontier to move outward
Slide 32
Build simple models to analyze or describe actual economic
situations. Employ Cost-Benefit Analysis: Compare the cost of an
action to the benefits received (Ex. ?) Baby Steps: Make decisions
by taking small, incremental steps toward the final goal
Slide 33
Studying economics will help us know how the economy works on a
daily basis. Helps us understand the Free Enterprise economy where
consumers and privately owned businesses, not the government, make
a majority of the economic decisions.
Slide 34
Helps us become better decision-makers, both in our personal
and professional lives AND at the voting booth!!
Slide 35
Every time a choice is made, something is given up! Rational
choice is taking the things with greater value and giving up those
with lesser value On an individual level, the choices are not so
difficult On the societal level, the choices may not be so easy to
make