Economic Unit 1 powerpoint

1. Economics & You

2. What is Economics?
Economics is all that deals with the
production, distribution, and
consumption of goods and services.
You are involved in economics every day of
your life.

3. How does economics relate to
MY life?

4. Needs
• Water
• Food
• Clothing
• Shelter
• Essential to KEEPING PEOPLE
ALIVE

5. Wants
• Things we don’t need
but that may make
our lives better.

6. Resources
Resources are the factors of production
that are used in the production of
goods & services.
Types of resources are natural, human,
capital and entrepreneurship.

7. Resources
• - The work done by individuals
• - machines, buildings, tools & money
• - raw materials water, minerals & land

8. Sometimes there are many
choices.

9. Sometimes only a few choices.
.

10. Choice
Choice is selecting an _item_ or
_action_ from a set of possible
alternatives.
We must make choices because
goods & services are _limited_.

11. Since resources are limited…
You have to make smart choices.

12. Making Choices
 Trade-off: choosing one
thing over another
 Opportunity Cost: cost of
choosing one thing over
another; you give up the
next best option.
 The Goal of economic
decision making is to
maximize resources
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13. When we were finished getting ice cream,
“Where are you two going?”
 The boy, whose name
was Omar, answered:
“We’ve saved up all our
money and today we are
going to the toy store!
My sister Zainib wants to
buy either a rabbit or a
bike and I want to buy
either a basketball net or
a skateboard”.
Toy Store

14.  Trade-off is the
process of choosing
one good or service
over another. The
item that you don’t
pick is the
opportunity cost.
The rabbit is Zainib’s
opportunity cost
and the skateboard is
Omar’s opportunity
cost.
Opportunity
Costs
Purchases

15. Principle #1: People Face Tradeoffs.
To get one thing, we usually have to give up
another thing. The opportunity cost of an item
is what you give up to obtain that item.
 Whether to go to college or to work?
 Whether to study or go out on a date?
 Whether to go to class or sleep in?
 Guns v. butter
 Food v. clothing
 Leisure time v. work
 Efficiency v. equity

16. Principle #2: The Cost of Something Is
What You Give Up to Get It.
Actor and rap star Will
Smith chose to skip
college (M.I.T.) and
go straight from high
school to the music
and film industry
where he has earns
millions of dollars.

17. Opportunity Cost
Opportunity Cost is what is _given_
_up_ when a choice is made - the
next _highest valued alternative.
Individuals must consider the _value_ of
what is given up when making a
_choice__.

18. Incentives
Incentives are things that incite or
motivate someone to make a choice.
Incentives are used to change
economic_ _behavior_.

20. • Yesterday, when I was
walking through town, I
decided to go to “Bubba’s
Ice Cream”. My friend
Fatima works there.
Fatima provides a service
to me because she serves
me ice cream. A service
is any kind of work
performed for others for a
fee. The ice cream is a
good. A good is
something you can feel, or
any kind of merchandise
that’s manufactured.
Bubba’s Ice Cream

21. •Look at the
pictures on
the right.
Which of
these
pictures
show goods
and which
ones show
services?
1)
2)
3)
4)

22. $$ Too Much $$
Price determines who gets
_goods_ and _services__.
(for you)

23. • I asked Fatima
for a double
scoop of my
favorite kind of
ice cream:
chocolate
chocolate chip.
“I am sorry
Huey, we are all
out of that
flavor”, she said.
Disappointed, I
settled for
vanilla.

24. • Fatima asked me if I
would like my vanilla ice
cream in a cup or a
cone. I asked for a
cone. Fatima said I was
lucky because there was
only one more cone
available. The little boy
behind me in line
wailed, “I wanted my ice
cream in a cone!” I told
Fatima that he could
have the last cone, and
that I would have mine
in a dish with chocolate
syrup.

25. What is supply and
demand?
• The supply of
chocolate chocolate
chip ice cream at
“Bubba’s” was gone
because it was in
high demand
(wanted) by many
customers. Look at
the chart on the left
to see what flavors
are in supply at
“Bubba’s Ice Cream”.
0
10
20
30
40
50
60
70
80
90
100
Gallons
vanilla choc. straw. mint
choc.
Flavors
Choc.
Choc.
Chip

26. Price
Price is the amount of _money exchanged
for a good or service.
Interaction of _supply_ and __demand__
determines price.

27. Demand
Demand is the amount of a good or
service that _consumers_ are willing
and able to _buy_ at a certain price.
Generally if…
Demand is high → Price is _high_
Demand is low → Price is _low__

28. Demand is high
Demand is low

29. Supply
Supply is the amount of a good or
service that _producers_ are willing
and able to _sell_ at a certain price.
Generally if…
Supply is high → Price is _low_
Supply is low → Price is _high_

30.  There was a scarcity
of cones at Bubba’s.
Scarcity means that
there are limited
resources, and
therefore, people must
make choices. Look at
the pictures on the
right. Which pictures
show a scarcity?
1)
2)
3)

31. Scarcity
Scarcity is the inability to satisfy all wants
at the same time. All resources and
goods are limited.
This requires that choices be
made.

32. • What to produce?
• How to produce it?
• For whom to produce?
3 Basic Economic questions

33. Production
Production is the combining of human,
natural, capital, and entrepreneurship
_resources_ to make goods or provide
services.
Resources available and
_consumer_ _preferences_
determine what is produced.

34. Consumption
Consumption is the using of goods
and services.
Consumer _preferences_ and _price_
determine what is __purchased_.

36. What is an entrepreneur?
• Russell is an entrepreneur. An
entrepreneur is a person who
comes up with a product or service,
or a better way to produce one.
They find the resources, the money,
and the time to produce new
products.

37. • I wished Deja
good luck and
continued on
my way. On
the next two
blocks were two
popcorn stands.
They both
lowered their
prices!

38. What is free enterprise?
• Both popcorn stands
lowered their prices because
of free enterprise. Free
enterprise means
competition. Companies
compete with one another
to get the most customers,
and therefore, make the
most money. I decided to
buy popcorn from the first
popcorn stand, because
their price was the lowest.
Popcorn
$0.50---
Now
$0.25!
Popcorn
$0.50---
Now
$0.30!

39. Henry Ford
• In October, 1913 a
revolutionary step
was taken in the
advancement of
factory assembly
when Henry Ford
unveiled his
moving assembly
line which made
production faster.

40. Weighing Costs and Benefits
• Model = simplified view, graph, helps
understand real world (more
complicated)
They also assume some factors WILL
NOT CHANGE
• Production Possibilities Curve = helps
maximize productivity
• Applying Models to Real Life
Simplistic-not all factors clear
picture of opportunity cost nothing more

42. Production Possibility Frontiers
Capital Goods
Consumer Goods
Yo
Xo
A
BY1
X1
Assume a country
can produce two
types of goods
with its resources
– capital goods
and consumer
goods
If it devotes all
resources to capital
goods it could
produce a maximum
of Ym.
If it devotes all its
resources to
consumer goods it
could produce a
maximum of Xm
Ym
Xm
If the country is at
point A on the PPF It
can produce the
combination of Yo
capital goods and Xo
consumer goods
If it reallocates its
resources (moving
round the PPF from A
to B) it can produce
more consumer
goods but only at the
expense of fewer
capital goods. The
opportunity cost of
producing an extra
Xo – X1 consumer
goods is Yo – Y1
capital goods.

43. Production Possibility
FrontiersCapital Goods
Consumer Goods
Yo
Xo
A
.B
CY1
X1
Production
inside the PPF
– e.g. point B
means the
country is not
using all its
resources
It can only produce at
points outside the PPF
if it finds a way of
expanding its
resources or improves
the productivity of
those resources it
already has. This will
push the PPF further
outwards.

44. Principle #3: People Face
Tradeoffs
• Efficiency v. Equity
– Efficiency means society gets the most
that it can from its scarce resources.
– Equity means the benefits of those
resources are distributed fairly among
the members of society.

45. • This completes my
lesson on
economics! I hope
you enjoyed the
tour. Economics is
an important part
of our lives. Think
of all of the ways
you use economics
everyday!
THE END