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Scarcity and Opportunity Cost

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Title: Scarcity and Opportunity Cost


1
Scarcity and Opportunity Cost
  • Staker

2
ECONOMICS
  • Economics the study of how people use scarce
    resources to satisfy unlimited wants
  • Microeconomics study of behavior and decision
    making by small units such as individuals and
    firms.
  • Macroeconomics study of the economy as a whole
    and decision making by large units such as
    governments and unions.

3
SCARCITY
  • SCARCITY society doesnt have enough resources
    to produce all the things people would like to
    have.
  • It is the fundamental economic problem

4
TRADE-OFFS OPPORTUNITY COST
  • Trade-offs other choices you could have made
    when you spend your or time.
  • What are you giving up when you make a choice?
  • Opportunity Cost the most desirable alternative
    given up when making a decision
  • Opportunity cost is the cost (VALUE) of the next
    best trade-off

5
Would you rather
  • Sleep late or go on a Caribbean cruise?
  • Sleep late or go to the mall with friends?
  • Sleep late or study for a test?
  • Whatever you chose depended on the opportunity
    cost of the alternativewhat you were willing to
    sacrifice.

6
Wants vs. Needs and Goods vs. Services
  • Wantsdesires
  • Needsnecessities
  • Goodsphysical objects such as clothes or shoes
  • Servicesactivities or actions that one person
    performs for another (mechanic, electrician)
  • Think of an example for each of these terms and
    put in your notebook

7
OPPORTUNITY COST
  • Time spent, convenience also has an opportunity
    cost.

8
OPPORTUNITY COST
  • Mr. Petty owns a small shoe store but has NO
    employees. On an average day he takes in 200 in
    sales, and thats about what he expects to make
    this Friday. Mr. Petty is offered an opportunity
    to go on a day-long competition on a local radio
    show on Friday. If he goes on the show he will
    have to close his shop, and will lose any sales
    he would have made for the day. At the radio
    show, he will compete against 100 other
    listeners, and the winner will receive 10,000.
    The game is based entirely on luck, so each of
    the 100 listeners has an equal opportunity of
    winning.

9
OPPORTUNITY COST
  • If he goes on the show, what is Mr. Pettys
    opportunity cost?
  • Do you think he should go on the radio show? Why
    or why not?

10
4 Factors of Production (C-E-L-L)
  • CAPITAL(physical) tools, equipment and factories
    used to produce goods and services. Human
    Capital-skills and abilities
  • ENTREPRENEURS people who take risks in search of
    profit they start new businesses or bring new
    products to market.
  • LABOR people with all their efforts, abilities
    and skills
  • LAND gifts of nature, not created by human
    effort

11
4 FACTORS OF PRODUCTION ILLUSTRATION ASSIGNMENT
  • Create an illustration about the 4 factors of
    production. The illustrations must be COLORED and
    should include
  • A label of each of the 4 factors
  • A short description/definition of each factor
  • Pictures with at least 3 items representing each
    of the 4 factors. (3 pictures for capital, 3 for
    labor, 3 for land, etc.)

12
3 Basic Economic Questions
  • WHAT to produce?
  • HOW to produce?
  • FOR WHOM to produce?
  • Society must answer these 3 questions as long
    as there arent enough resources to satisfy the
    problem of scarcity

13
3 Basic Economic Questions
  • Apple Computers to Begin Manufacturing Computers
    Made Specifically for Elementary Children
  • Powerade Will Be Sold in All High Schools Next
    Year.

14
3 Basic Economic Questions
  • China Will Focus on Increasing Rice Production
    in 2007
  • DVD Players Will Now Be Manufactured Entirely by
    Robots

15
3 Basic Economic Questions
  • United States Hopes to Become the World Leader
    in Potato Production
  • Henry Ford Revolutionizes Automobile Production
    by Using an Assembly Line

16
Review Activity
  • Write 3 newspaper headlines on your own one for
    each of the 3 Basic Economic Questions.
  • You will share one of them with the class and the
    class will guess which question your headline is
    addressing.

17
Create your own business
  • Imagine that you are an entreprenuer starting
    your own business.
  • First, what kind of business would it be? (What
    good or service are you providing?)
  • Be sure to give AT LEAST three aspects of LAND, 3
    aspects of LABOR, and 8 aspects of CAPITAL needed
    to successfully run and manage your business.
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