Economics 101

Strand 5: Concept 1: PO 1-4

Mr. Mosqueda

Wants & Choices

Economics is the study of CHOICES (as they pertain to PRODUCERS, CONSUMERS and the GOVERNMENT)

Everybody wants different things Clothing, food, shelter, etc Wants change over time

(toys, etc) Depends on society, cultures,

climate, interests, etc… Wants can be long or short term

VIDEO CLIPWilly Wonka: I Want It Now!

Productive Resources

The price/cost of the items we want depend on three factors: Factors of productionproduction

LAND (Resources from the Earth, unaltered by man)

LABOR (People’s effort, skills and knowledge)

CAPITAL (Man-made resources used over and over– eg., computers, machines, etc.

Production to Consumption

The GOODS and SERVICES produced are then sent to the consumers to be:

BARTERED without without moneymoney

PURCHASED with money with money (savings)(savings)

(This is called consumption)

The Consumption Problem

Productive resources (land, labor and capital) and goods and services are limited

Human wants and needs are unlimited

Resulting in SCARCITY

Making Choices

There are never enough resources to produce all the goods and services people want (SCARCITYSCARCITY)

As a result, people must make CHOICESCHOICES about what want they want to satisfy

Making Choices

Because things are scarce, buyers (consumers) and sellers (producers) have to make ECONOMIC CHOICES (resulting in OPPORTUNITY COSTS) CostsCosts (what you have to give up in order to get what you

want, eg. Money, time, etc.) OPPORTUNITY COSTOPPORTUNITY COST: the highest valued benefit

given up when a choice is made If the opportunity cost is worth it, then you should consume it!

What does it mean to study Economics?

Based on consumer choice and opportunity costs, economists must answer three basic questions: WHAT goods and services will be produced? HOW will the goods and services be

produced TO WHOM will the goods and services be

distributed?

The Study of Economics

By answering these questions most efficiently creates the need for SPECIALIZATION and INTERDEPEDENCE resulting in trade

Economics: DECSISION-MAKING under SCARCITY

Independent Practice

Answer Questions 2-6 on page 357, use Chapter 13, Section 1 (PP 349-357) for help if needed.

What you don’t finish in class, will be HOMEWORK!

Types of Economies

People do not make economic decisions all by themselves Communities working

together to produce, distribute and consume products is called an ECONOMYECONOMY

There are 3 types of economies Traditional, Market and

Demand

Traditional Economies

Traditional economies rely on people working together to help the whole community EX: Ancient tribes of

hunters, families, etc. All men hunting to “produce”

enough food for the entire tribe, all resources are shared by the entire community

Pure traditional economies are rare today

Command Economies

Government owns and controls the factors of production and makes economic decisions for the entire community Government decides

what people “need” or “want” and distributes it to the people

Socialism (USSR), North Korea, China, Kings

Market Economy Opposite of a Command Economy

Private individuals produce factors of production and are free to make their own choices about production, distribution and consumption

Relies on competition to produce high quality at low prices (Walmart, Target, etc)

People are free to do as they wish in order to make money

Very little government control Also known as Free Enterprise or

Capitalism Entrepreneurs create and run

companies and small businesses USA

Market Economy

BenefitsBenefits

1. Makes people rich

2. Competition produces high quality at low costs

3. Encourages creativity

4. More choices for consumers

5. Encourages hard work

DisadvantagesDisadvantages

1. People can take advantage of system

2. Greedy3. Can easily get out of

control4. Rich get richer, poor get

poorer5. Government may have a

difficult time intervening if necessary

Market Economy

Adam Smith Father of Capitalism Book: The Wealth of

Nations Absentminded

Frequently walked into things

Horrible cook Sleepwalker/Daydreamer Had prolonged

conversations with himself

Independent Practice

Answer Questions 2-5 on page 369, use Chapter 13, Section 2 (PP 363-369) for help if needed.

What you don’t finish in class, will be HOMEWORK!