ECONOMICS

D AY 3 – T H U R S D AY, J A N U A RY 7 T H

OPENER: DAY 3, JANUARY 7TH

• Crash Course - Intro to Economics

WHAT DID WE LEARN YESTERDAY?

Each of the six content units in this course will connect to four main

themes.

1. Scarcity – unlimited wants/needs with limited/scarce resources

2. Voluntary Exchange – self interest sparks exchange resulting in

personal gain

3. Incentives – positive and negative – influence behavior

4. Economic Interdependence – together we can have

everything!

WHAT DID WE LEARN YESTERDAY? Scarcity >

Choices >

All Choices Have a Cost >

Trade-Off/Opportunity Cost

• Primary needs (survival) vs. secondary wants

• Resources/Four Factors of Production

1. Natural Resources

2. Human Resources

3. Capital Resources

4. Entrepreneurship

WHAT DID WE LEARN YESTERDAY?

Three basic economic questions:

1. What to produce (products/services)

2. How to produce (production)

3. For whom to produce (consumers)

Efficiency = maximum output within given resources/inputs

Improving Efficiency - The production of most goods can be broken

down into a number of specific tasks (division of labor), with each of

these tasks assigned to specific workers (specialization)

WHAT DID WE LEARN YESTERDAY?

Three types of exchange:

1. Barter – exchange product for product – no money

2. Money – exchange product for money

3. Credit – exchange product for ‘promise to pay’

• Price is determined by value.

• Value is determined by the price someone is willing to pay for the

item.

• Utility- the usefulness of an item to a person

• Self sufficiency vs. interdependence

There is no such thing as a free lunch!

ROLE OF THE ENTREPRENEUR WHAT DO THEY DO?

• Combine factors of production to create products

• Successful entrepreneurs attract other firms to the industry

(this helps everyone!)

• Search for profits = new products = competition =

more production = lower prices for consumers

ECONOMIC GOAL – GREATER PRODUCTIVITY • Productivity – the value of our output for every unit of input (i.e.

efficiency)

• Economic Goal = Achieve the highest productivity or output

with our resources or inputs.

–Don’t waste anything - materials, energy, efforts, money, and time

• To be more productive we must:

–Create more output with the same inputs

–Create same output with less inputs

HOW TO INCREASE PRODUCTIVITY

• How to increase productivity?

• Division of Labor

• Specialization

• Invest in human capital

ECONOMIC EQUATION

Land + Labor + Capital = Output

SCARCITY > CHOICES >TRADE OFFS

• Because choices must be made to efficiently use your

resources, sometimes you will have to make a trade off

• T.O. = Trade Off- the sacrifice of one good in order to

purchase or produce another.

• The cost of the T.O. is called a O.C.

• Opportunity Cost- the value of the next best alternative in

terms of money, time, value and utility.

ONCE AGAIN… OUR ECONOMIC GOAL

• Achieve the highest productivity or output with our resources or inputs.

– Don’t waste anything - materials, energy, efforts, money, and time

PRODUCTION POSSIBILITIES • Suppose that you were the CEO of Chrysler, and you had to

decide whether to produce luxury cars or economy cars.

Versus

You would want to create a Production Possibilities Curve (PPC)

PRODUCTION POSSIBILITIES CURVE

• A Production Possibilities Curve (PPC) shows all of the possible combinations of two goods or services that can be produced within a stated period given two assumptions:

1. That the amount of available resources and technology will not change.

2. That all of the factors of production are being used in the most efficient way.

• Crash Course- Production Possibilities Curve

PPC EXAMPLE

PPC RULES

1.Any point on the PPC uses existing resources efficiently

2.Any point outside the PPC is not realistic, attainable or

sustainable given existing resources

3.Any point inside the PPC is inefficient

PPC SHIFTS WHEN PRODUCTIVITY CHANGES

1. What condition would cause

the curve to shift to the right?

1. Either new resources or better

technology.

PPC SHIFTS WHEN PRODUCTIVITY CHANGES

2. What conditions would cause

the curve to shift to the left? 2. Decrease in available resources,

war or other disasters.

PPC SHIFTS WHEN PRODUCTIVITY CHANGES

3. What condition is represented

by a point lying inside the

curve?

3. Inefficient use of resources.

Crash Course - PPC Shifts

PRODUCTION POSSIBILITIES CURVE = PRODUCTION POSSIBILITIES FRONTIER

• 'Production Possibility Frontier (PPF) is a curve depicting

all maximum output possibilities for two or more goods

given a set of inputs (resources, labor, etc.).

• The PPF assumes that all inputs are used efficiently.

• So a PPF = PPC

QUESTIONS FOR REFLECTION

• Why are entrepreneurs important?

• Why is important to measure productivity?

• Define the Production Possibilities Curve.

HOMEWORK – DAY 3, JANUARY 7TH

• Read over your Guided Notes from yesterday and today.

• Tomorrow, there will be a quiz!

• Before you leave class today, make sure to get your Guided

Reading for tonight!

• Using your Economics textbook or online textbook, read the rest of

Chapter Two – Sections 1 and 2.

• As you read, write in all missing words and phrases.

• Remember to answer the questions at the end with complete

thoughts and sentences.

ECONOMICS IN THE NEWS

Bonus Points!

• On a clean sheet of paper, write the following heading:

– Your full name

– Today’s Date – Thursday, January 7th

– Block #

– Assignment Name: Closer – Economics in the News

• Underneath the heading, make three columns with the following headings

NORTH KOREA ADDICTION FLIGHT ENGINEER

• Watch today’s CNN Student News through the ‘eyes’ of an economist

• As you watch each part of the segment, write down words and concepts that we’ve talked about in our economics class (ex. Choices, trade-off, efficiency, productivity, etc.)