Vocabulary

1
Vocabulary

• Investment- Using resources that could be used
  immediately for the purpose of gaining a greater
  benefit later.
• Law of Diminishing Returns- The amount of
  benefit/output decreases when a changing variable
  input is added to a fixed output.

2
REVIEW

• what are ways producers try to increase
  productivity?
• What is the difference b/w specialization and
  division of labor?
• How does using specialization and division of
  labor lead to more production and better quality?
• Summarize the difference between the cottage
  industry and factory industry.
• What is the difference between an invention and
  an innovation?
• What is robotics?
• What is automation?
• What is agribusiness?
• Summarize the difference between a skilled and
  unskilled worker?
• What is the difference between an blue collar job
  and a white collar job?

3
Warm up?

• What is an investment?
• Using resources that can bring you immediate
  benefits for the purpose of gaining greater
  benefits in the future is an investment.
• An example of financial investment is when people
  buy stock

4

• Selling laptops at discount prices and producing
  so many of them so as to still make a huge profit
  is an example of what?
• Assembly line technology
• Adequate business organization
• The practice of mass production
• The application of automation
• Of the following, who would most likely earn the
  highest wage/salary?
• An uneducated blue collar worker
• A skilled white collar worker
• Someone who graduated high school and has very
  little additional training
• Someone who works as a hired hand on a farm

5
Resources Investment
6
Investment in Goods

• Capital goods
• Products used to make other goods or provide
  services.
• Investing in capital goods allows workers to do
  more work in a given timeframe
• Productivity
• Consumer goods
• Items purchased for final use.
• Ex ipod or a toaster
• Recycling can increase investment.

7
Investment through Education

• When laborers invest in education/training, they
  will more likely have a higher income.
• Investments are made when the likely return is
  considered more valuable than the otherwise
  immediate gratification.

8
How much to Invest?

• By comparing the cost of investment and estimated
  future benefits, businesses can decide how much
  money to spend on investments.
• Producer Price Index (PPI)
• Maintained by US Govt
• Measure the cost of raw materials companies use
  to make our products
• PPI tries to determine 2 things from monitoring
  the changing cost of raw materials 1 how fast
  these prices are rising and 2 whether producers
  are passing this rising cost onto consumers

9
Input vs. Output

• Opportunity costs of investment
• Not using that money to produce more goods to be
  sold
• The opportunity cost of investment can be found
  by comparing input and output

10
Costs of Investment

• The opportunity cost of investment (lost
  production) can be found by comparing the ratio
  of output vs. input.
• Input is all of the factors of production that go
  into making a good.
• Output is simply the amount of the good being
  made.
• Ex You pay 50,000 for a college degree, but you
  never work a day in your life. What was the
  input/output? Was that a good investment?
• You bought a 25,000 boat that you used every
  weekend in the summer for 5 years. Was that a
  good investment?

11
Law of diminishing returns

• When the amount of a variable input (input whose
  amount can change) is added to a fixed input
  (input that is unchanging) the amount of output
  decreases say whaaaat?
• Ex You own a McDonalds. You hire one worker and
  the number of burgers made goes up by 10 per
  hour. You hire one more worker and they increase
  burger output by 11. one more worker adds 12
  burgers. However, adding that 4th worker only
  adds 7 burgers. The grill is getting cramped,
  people can't move as easily. adding a 5th worker
  would only add 3 more burgers. People can barely
  move around the grill. The investment in worker
  4 and 5 is no longer that beneficial to you.
• of workers is the variable input (number can
  change), the grill is the fixed input.

12
reflection

• Why do people and businesses make investments?
• Why would a business invest in capital goods?
• Why would employers invest in their workers
  education level?
• What do businesses use to figure out how much to
  invest?
• How do producers find the opportunity cost of
  investment?
• Summarize the law of diminishing returns.

13
Closing?

• Why do people and businesses make investments?