Transcript Scarcity, Choices and Trade-offs

Scarcity, Choices and Trade-offs
Social Studies/
Economics
Measurement Topic 1.1
Descriptive Overview:
The central problem in the economics of any country is scarcity.
When wants are greater than the resources to satisfy them,
problems can arise ranging from trade-offs to rebellion.
Goal and Objective
• Students will be able to:
• identify conditions when prolonged
scarcity becomes a long-term problem
• differentiate between choices are
trade-offs that are acceptable and
those that are not and why
• Analyze opportunity costs and how
they affect the economic decision
making process
• identify factors that lead to
scarcity of resources
Terminology/
Vocabulary:
• Needs and wants
• scarcity
• choices
• trade-offs.
• Factors of production
What the heck is economics?
• The study of the way people make
decisions to satisfy their needs and wants
using their limited available resources.
• Why is this important????????
• What resource does everyone have, just in
different amounts?
• You have a job after school, you need to study for
three exams this week and a project. How do you
budget time to account for all of this?
• You want to go out with friends, but you have a family
get together to go to that you want to be at as well,
what choice do you make?
• You are playing in the Super Bowl and your wife is
about to give birth to your first child Sunday
afternoon. What do you do? You want to be at both.
Why do we have to make choices?
• 2 factors cause us to make choices
• Factor #1: SCARCITY BABY!!!!!!!!!!!
– Always Present
– There is a limited supply of natural resources and we have
unlimited wants
– Which means no one can get everything they have ever
wanted
• Factor #2:Shortages
– Only from time to time
• When producers will not or cannot produce the goods
people want at current prices
The Central Fact of Economics Is SCARCITY
• Scarcity
– Resources are the things society uses to produce goods and
services
• These resources are scarce (limited)

The economic problem

There are never enough resources to produce all of the goods and
services that people want
• Therefore; nothing in life is free. Everything comes
with a cost
– There is no such thing as a free lunch TINSTAAFL
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
2-4
Scarcity and Choice
• Human wants are unlimited, but resources
are not.
• Three basic questions must be answered in
order to understand an economic system:
– What gets produced?
– How is it produced?
– Who gets what is produced?
Four Economic Resources (Factors of
Production)
•Land
•Labor
•Capital
•Entrepreneurial ability
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
2-5
Land
– Includes natural resources such as timber, oil,
coal, iron ore, soil, water, as well as the ground
in which these resources are found
– Is used for the extraction of minerals and
farming
– Provides the site for factories, office buildings,
shopping centers, homes, etc.
– Produces “rent”
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
2-6
Labor
– The work and time for which one is paid is what
economists call “labor”
– Money received for one’s labor is called wages
and/or salaries
– About two-thirds of the total resource cost is the
cost of labor
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
2-7
Capital
– Man-made goods used to produce other goods or
services is what economists call “capital”
• Examples are office buildings, stores, and
factories
– The money owners of “capital” receive is called
“interest”
– Capital is the MOST important of the four
economic resources
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
2-8
Entrepreneurial Ability
• The entrepreneur
–
–
–
–
Sets up a business
Assembles the needed resources
Risks his/her own (or borrowed) money
Makes a “profit” or incurs a “loss”
• Is central to the American
economy
– 23 million businesses are virtually all
entrepreneurs
• The vast majority work for themselves
or have one or two employees
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
2-9
Scarcity and Choice
• Every society has some system or mechanism that transforms
that society’s scarce resources into useful goods and services.
How do people choose?
• Take into consideration several factors:
1. Is the item a want or a need?
2. What trade-off is involved?
3. What is the opportunity cost involved?
Key Questions:
• How does scarcity affect our
decision making?
• What role does scarcity play in
economics?
• What are the factors of production?
• What are the country’s natural
resources?
• What role do needs and wants play
in the economic decision making
process?