Transcript What is Economics? - Bremen High School

What is Economics?
What is Econ?
• Economics: the study of how individuals,
families, businesses, and societies use limited
resources to fulfill their unlimited wants.
Wants vs. Needs
To economists, wants and needs differ.
Something that is necessary for basic survival is
a "need;" anything else is a "want."
Scarcity
• Why can’t people fulfill all their needs and
wants? scarcity
– Unlimited wants
– Limited Resources
Now what?
• The basic problem of economics—forces people
to make choices when satisfying their needs and
wants.
(making choices story)
Factors of Production
• When economists talk about scarce resources,
they are referring to four factors that must be
present for any good or service to be
produced:
• Land – natural resources without human
intervention
• Labor – the work people do
– Goods – things you can touch
– Services – activities done for others for a fee
Factors of Production (cont.)
• Capital – manufactured goods used to make
other goods and services
– Increases productivity – ability to produce things
in better and faster ways
• Entrepreneurship – ability of individuals to
start new businesses, introduce new products
and processes and improve techniques
– Risky – 30% fail
– Entrepreneurship Quiz
Factors of Production (cont.)
• Technology? – any advancement that allows
things to be done more efficiently
• http://www.youtube.com/watch?v=OS_9A_EA
30M
Twinkies
• “Twinkies were invested in 1930 by James A. Dewar, a
plant manager for Continental Baking Company. Faced
with economic hardship, it didn’t make sense to Dewar
that the bakery had lots of expensive pans dedicated to
a product called Little Shortcake Fingers that was baked
only six weeks a year – during strawberry season.
Dewar thought the little cakes could sell year-round if
the company came up with something to replace the
strawberry cream placed inside. He mixed up a
banana-flavored ‘crème’ and figured out a way to inject
it into the shortcakes using syringe-like injection
tubes.”
• What factors of productions go into the making of
Twinkies?
What will it cost you?
• Because of scarcity, people must make choices about how
they will use their resources. These choices result in tradeoffs and opportunity costs.
• Choices
Trade-offs & Opportunity Costs
• Trade-offs – sacrificing one good or service for another
(what do you have to give-up?)
• Opportunity Costs – the value of the very next best
alternative
– What is the value of what you had to give-up?
– You are always losing something
Economics of Seinfeld
Make a choice:
1. Ok with red glare – get chicken
2. No red glare – no chicken
=Opportunity cost
Decision-Making Process
Define the
Problem
Review Your
Decision
Identify the
Choices
Act of Your
Choice
Evaluate the
Advantages
and
Disadvantages
of Each Choice
Choose
How do Economists make decisions?
• Economists use a production possibilities
curve to reveal trade-offs and opportunity
costs involved in business decisions.
• Graph shows the max combinations that can
be produced from a fixed amount of resources
(helps decide how to use resources)
Guns vs. Butter
Military vs. civilian
The current federal
reimbursement program is
based on household incomes;
the poorest American students
receive $2.47 of federal funding
towards their “free lunches”,
while students from the highest
income bracket only receive
$0.23 per meal. The problem is,
the average school lunch now
costs $3.10, so these days no
one is actually receiving a “free
lunch”, not even the poorest
American students.
Schools of Thought
• This chapter also focuses on how economic models
help economists analyze problems, and it concludes
with an examination of why there are different schools
of economic thought.
• Micro-economics - economics of small units
(individuals and firms)
• Macro-economics – economy as a whole; large units
(government)
• Economy – all the activity in a nation that together
affects production, distribution and use of goods
• http://www.youtube.com/watch?v=DJG-liA19eY
Models
• Economic Models – simplified representations
of the real world (a visual look at a complex
econ situation)
– Good way to create a hypothesis – educated
guess
– Too many factors to accurately predict
Economists
• Economists deal with facts
– Influenced by opinion, government, etc –- many
different views and theories
– Economists help us by informing us as to likely
short-term and long-term outcomes