Introduction to Economics Powerpoint

Choices, Choices, Choices, . . . Concept(S): Scarcity, Opportunity Cost, & Trade Offs Skills: Decision Making

What you’ll be doing today…   Looking at the importance of choice  Introduction to three major concepts of economics: 1. Scarcity 2. Trade offs 3. Opportunity Cost You’ll reflect on all this by end of period with some questions to consider

Preamble   Your professor first semester in college is describing her policy on late work. She says you can turn in late work even after the deadline. But, if you turn the assignment in on time, and you don’t like the grade, you can resubmit it for review for a higher grade. If you turn in the work after deadline, and you don’t like the grade you cannot get it reviewed for higher grade.

 Would you turn in your work on time? Or submit your work after the deadlines? Explain your thought process

Choices!  Instructions:  With a partner, walk around and look at all the items posted on the wall –  For every pair of items you see- Answer this question:  “Which do you prefer and why?”  Explain to your Jedi partner your reasons for your preference- Jedis you speak first  You will have 1 min each to discuss with your partner

Debrief…  Discussion Questions:  What do you gain from your choice?  What do you lose from your choice?  Why is choice so important in our daily lives?

Part 1: The Basics



WHAT IS ECONOMICS???

  Economics – the study of how individuals and societies make decisions about ways to use scarce resources to fulfill wants and needs.  What does THAT mean?!!??!!

The Study of Economics Macroeconomics   The big picture: growth, employment, etc.  Choices made by large groups (like countries)

Microeconomics  How do individuals make economic decisions

ECONOMICS: 5 Economic Questions



ALL Societies (we) must figure out WHAT to produce (make) HOW MUCH to produce (quantity) HOW to Produce it (manufacture) FOR WHOM to Produce (who gets what) WHO gets to make these decisions?

What are resources?   Definition: The items used to make other goods (products)

BUT, there’s a Fundamental Problem: SCARCITY: unlimited wants and needs but limited resources

Choices, Choices Because ALL resources, goods, and services are limited – WE MUST MAKE CHOICES!!!!

Why Choices?  We make choices about how we spend our money, time, and energy so we can fulfill our NEEDS and WANTS. What are NEEDS and WANTS?

Wants and Needs, Needs and Wants



 NEEDS – “stuff” we must have to survive, generally: food, shelter, water,

 WANTS – “stuff” we would really like to have (Fancy food, shelter, clothing, big screen TVs, jewelry, conveniences . . . Also known as LUXURIES

VS.

TRADE-OFFS 

You can’t have it all (SCARCITY – remember?) so you have to choose how to spend your money, time, and energy. These decisions involve picking one thing over all the other possibilities – a TRADE-OFF!

Trade-Offs, cont. Chew on This!: What COULD you have done instead of coming to school today?

These are all Trade-Offs!

A special kind of Trade-Off is an

OPPORTUNITY COST =



The Value of the Next Best Choice (Ex: Sleeping is the opportunity cost of studying for a test)

Opportunity Costs  I have $12 in my pocket

I have $12 in my pocket

 Then, what happens to If I buy a pizza… the movies… Q: What is the opportunity cost of buying pizza?

Practice 

 Several students were talking about taking time off after graduating high school so they could spend two years traveling around the world. One student remarked, “It’s a great idea, but can you imagine how much it would cost? Even if you backpacked and camped out, it would still cost you $10,000!” An economics student replied that the sum of money would not amount to even half the cost. Explain what the economics student is talking about. *Hint- Review the concepts of scarcity, trade offs, & opportunity cost to respond to this scenario. What are the students gaining? What are they losing? What are the alternatives (other options) *Be sure to also underline or highlight the scarce resources, tradeoffs and/or opportunity cost

Our Plan for the day…   Discuss the concept of Outsourcing  Introduce the concept of Factors of Production  Look at some news coverage and a TV show called 30 days about the pros and cons of Outsourcing

MADE IN THE USA!  Preamble • We are going to watch a promotional video from the garment manufacturing and retail company American Apparel • Things to watch for: 1. What makes AA different than other clothing companies? 2. Why do you think they have become so popular? American Apparel Sewing 5th Floor AA Sewing

Wrap Up For the Day Will Be…   Listing ALL FOUR Factors of Production  Explain the process of production identifying all the components (pieces of production)

Production So how do we get all this “stuff” that we have to decide about? Decisions, decisions …

PRODUCTION, cont.   Production is how much stuff an individual, business, country, even the WORLD makes.  But what is “STUFF”?

 STUFF – Goods and Services.

 Goods – tangible (you can touch it) products we can buy  Services – work that is performed for others

Goods & Services  Goods

Services

Factors of Production So, what do we need to make all of this Stuff?

4 Factors of Production  LAND Water, natural gas, oil, trees (all the stuff we find on, in, and under the land

LABOR Physical and Intellectual  Labor is human power

4 Factors of Production  CAPITAL

- Tools, Machinery, Factories  Human capital is brainpower, ideas, innovation

ENTREPRENEURS

 Investment $$$  The risks of investing

Which Factor of Production is it? 

Which Factor of Production is it? 

Which Factor of Production is it? 

Which Factor of production is it? 

THREE parts to the Production Process



Factors of Production – what we need to make goods and services Producer – company that makes goods and/or delivers services Consumer – people who buy goods and services (formerly known as “stuff”)

What’s the relationship like?

Production Process  Land Goods Labor

Production/Manufacturing “Factory”

Consumers

Capital Services Entrepreneurship

Capital Goods & Consumer Goods Capital Goods: are used to make other goods

Consumer Goods: final products that are purchased directly by the consumer

CHANGES IN PRODUCTION Division of Labor – different people perform different jobs to achieve greater efficiency (assembly line).

You do your job, and I will do my Job and we will be more EFFICIENT

CHANGES IN PRODUCTION  Consumption – how much we buy (Consumer Sovereignty [control]) The DELL store is empty because….

Everyone is at the APPLE STORE!!! Can you identify what problem Dell has in this scenario?

Choices that Dell has to make   With your jedi partner, take 3 mins to brainstorm what options does Dell have if the Apple store is as full as seen in the pic before  Let’s bring these out to the floor… Dell can do what lots of American companies have been doing for quite some time… OutsourcingThe practice of companies sending production to other countries where materials and labor are cheaper = this reduces costs for companies = can charge less for goods/services… = what choices will consumer make?

What outsourcing looks like in 21st century

 Carrier-An American AC/Heater company

Indian manufacturing workers

Is outsourcing good or bad for Americans?



 We Will be watching an episode of the TV show 30 days by Morgan Spurlock (Supersize Me)  Pay attention to the choices that tech companies have made  How do these choices impact American workers? Indian workers?  What are the trade offs and opportunity costs of outsourcing?

Practice with Factors of Production Land

Open field of grass where the cows graze

Labor -Farmer who milks cows

-Cheese maker -Packaging -Delivery

Capital -Milking tools

-Farm -Containers, etc.

Entr. -Money

-Ideas -Experience on cow farming and cheese making

Wrap Up For the Day!   List & Describe ALL FOUR Factors of Production  Explain the process of production identifying all the components (pieces of production) (The Three parts of production & the visual)  Do you agree or disagree with the practice of outsourcing? Explain your rationale- Identify and discuss the trade offs and opportunity costs of Outsourcing

Can you do the following?...   Define Scarcity & provide examples  Define Trade Offs & provide examples  Define Opp Cost & provide examples  Explain why and how choice is impacted by all THREE above  List ALL four Factors of Production with example for each  Explain the production process (the diagram) with the THREE components  Discuss how outsourcing works, the trade offs, and opportunity costs of this business practice