Unit 1 Economics

Unit 1: Fundamentals

Scarcity, Opportunity Cost, and Factors of Production

Scarcity and Opportunity Cost

SSEF1 Analyze how scarcity affects the choices of individuals, businesses, and governments.

a. Explain that scarcity is a basic, permanent condition that exists because unlimited wants exceed limited productive
resources.

d. Apply the concept of opportunity cost (the forgone next best alternative) to personal choices, as well as business and

government decisions.

Standard:

I can define and give examples of scarcity and opportunity cost for
individuals, businesses, and governments.

I can differentiate between opportunity cost and trade offs, scarcity and
shortages.

Learning Targets:

Scarcity is a basic, permanent condition that
exists because unlimited wants exceed limited
productive resources.

Economics is the study of the allocation of
scarce resources.

What is scarce in this picture? ------>

Scarcity and Opportunity Cost

Scarcity is a basic, permanent condition that exists because unlimited
wants exceed limited productive resources.

-to be scarce, something must be limited and desirable.

Scarcity and Opportunity Cost

Scarcity is a basic, permanent condition that exists because unlimited
wants exceed limited productive resources.

Give an example of a time where your wants exceeded your limited
resources.

Shortage is a temporary condition that can be overcome.

Scarcity and Opportunity Cost

Because of scarcity, every choice has an opportunity cost.

An opportunity cost is the thing you give up when you make a choice.

It’s what you would have spent your time on instead.

It’s what you would have spent your money on instead.

Tradeoffs are all of your possible choices, but an opportunity cost is
your most rational choice.

Scarcity

Goals for this section:

Define and give examples of scarcity and opportunity for individuals,
businesses, and governments.

Be able to differentiate between opportunity cost and trade-offs, scarcity
and shortages.

Scarcity and Opportunity cost

Scarcity/Opportunity cost concept evaluation

Scarcity activity: Dance or card trade

Activities

Allocating Scarce Resources

SSEF1 Analyze how scarcity affects the choices of individuals, businesses, and governments.

b. Compare and contrast strategies for allocating scarce resources such as by price, majority rule, contests, force, sharing,
lottery, authority, first-come-first-served, and personal characteristics.

Standard

When given an allocation type, be able to give examples of it in use and
areas where it would be appropriate and inappropriate.

Learning target:

When we face scarcity, we must allocate resources.

Individuals have to do this - time, budgeting

Governments have to do this - permits, policing, road repair

Businesses have to do this - staffing, product selection

Allocating Scarce Resources

There are many ways to allocate scarce resources, on the next few slides
we will define and give examples of some of them.

Allocating Scarce Resources

Price: If you can afford it, you can have it.

Anything you buy at a store is price allocated.

Allocating Scarce Resources

Majority rule - if you get the most votes, you can have it.

Allocating Scarce Resources

Contest: If you win it, you can have it.

Is college admissions a contest?

Allocating Scarce Resources

Force: If you can take it, you can have it.

What are some examples of things taken by force?

Allocating Scarce Resources

Sharing: If it is your turn, you can use it.

What is a resource we share at school?

Allocating Scarce Resources

Lottery: If your number is called, you can have it.

What is chosen by lottery? (other than the obvious!)

Allocating Scarce Resources

Authority: If the person in charge says you can have it, you can have it.

Who decides your schedule at school?

Allocating Scarce Resources

First-come-first-served: If you get there before it runs out, you can have
it.

Have you ever been too late to get something?

Allocating Scarce Resources

Personal Characteristics - If you meet the criteria, you can have it.

What jobs have criteria that you can’t change about yourself?

Allocating Scarce Resources

Allocating Scarce Resources - how are these allocated?

Allocating Scarce Resources - how are these allocated?

Allocating Scarce Resources - how are these allocated?

Goals for this section -

When given an allocation type, be able to give examples of it in use and
areas where it would be appropriate and inappropriate.

Goal Check:

Scarce Resources Carousel Activity

Mary Persons Parking Activity

Loteria

Allocating Scarce Resources - Standard mastery worksheet

Allocating Scarce Resources - Activities

Factors of Production

SSEF1 Analyze how scarcity affects the choices of individuals, businesses, and governments.

c. Define and give examples of productive resources (i.e. factors of production): natural resources (i.e. land), human
resources (i.e. labor and human capital), physical capital and entrepreneurship.

Standard:

Define the factors of production.

Be able to name and give examples of each of the factors of production.

Be able to differentiate between products and factors of production.

Goals for this section:

What resources must governments and businesses allocate?

Capital (Human, Physical, Financial)

Entrepreneurship

Land

Labor

Factors of Production

Payments associated with each factor of production:

Capital (Human, Physical, Financial) - interest

Entrepreneurship - profit

Land - rent

Labor - wages

Factors of Production

Human Capital - the time, physical abilities, knowledge and skills of
workers used in the production of goods and services.

Factors of Production

Physical Capital - the tools, machines, equipment used in the production
of goods and services.

Factors of Production

Financial Capital - the money used to finance training and equipment used
to produce goods and services

Factors of Production

Entrepreneurship - the person who directs the use of the other
productive resources

Factors of Production

Land - the raw, natural materials OR the physical location of the
workplace.

Factors of Production

Labor - the workers

Factors of Production

All of the resources added together give you …. Your product!

Factors of production

+
+
+

=

Factors of production concept evaluation

Activity

Define the factors of production.

Be able to name and give examples of each of the factors of production.

Be able to differentiate between products and factors of production.

Learning targets:

Quizlet

Quizizz Practice

Get Ready for your quiz!

Rational Decision Making

SSEF2 Give examples of how rational decision-making entails comparing
the marginal benefits and the marginal costs of an action.

a. Explain that rational decisions occur when the marginal benefits of an
action equal or exceed the marginal costs.

b. Explain that individuals, businesses, and governments respond to
positive and negative incentives in predictable ways.

Standard:

Goals for this section:

Define rational decision, marginal cost, marginal benefit.

Identify a rational decision and a benefit maximizing decision on a
marginal cost and benefit chart.

Give an example of a rational decision using marginal analysis.

Give an example of how people respond to positive and negative
incentives.

Rational Decisions

What does rational mean?

What does a rational decision look like?

What is an irrational decision look like?

Rational Decisions

Rational decision makers use marginal cost and marginal benefit to
identify the best choice.

Marginal - small change

Marginal cost - the cost of adding one unit of something

Marginal benefit - the benefit from adding one unit of something

Diminishing Marginal Returns - as you make more of something,
your benefit begins to decrease

Rational Decisions

What are the costs and benefits of continuing each action?

Rational Decisions

Do you think these people

-Cut their own grass?

-Clean their own homes?

-Change their own oil?

-Cook their own meals?

Why or why not?

Rational Decisions

Diminishing Marginal Returns: As you continue to add more and
more of something, the costs tend to increase while the benefits tend to
decrease.

What is the marginal cost of owning one car? Two? three?

Is it good to have one car? Two? Three?

How many are too many?

Rational Decisions

In graphical form:

Rational Decisions

In graphical form:

Rational Decisions

Profit

Profit →

You maximize profit
when you produce where
marginal cost equals
marginal benefit.

Where is the profit
maximizing point on the
graph?

Rational Decisions

Another way:

Another way:

Another way:

Another way:

Another way:

Another way:

Another way:

Another way:

Incentives

Incentives - makes you want to change your behavior

-Positive incentives - reward desired behavior

-Negative incentives - punish undesired behavior

Incentives

Goals for this section:

Define rational decision, marginal cost, marginal benefit.

Identify a rational decision and a benefit maximizing decision on a
marginal cost and benefit chart.

Give an example of a rational decision using marginal analysis.

Give an example of of how people respond to positive and negative
incentives.

Learning targets:

Rational decision concept evaluation

Activity

Quizlet

Quizizz

Get Ready for your vocabulary quiz and Unit Test!