Transcript Unit 1 Fundamental Concepts SSEF1, SSEF2, SSEF3, SSEF4, SSEF5, SSEF6 A social science studying the allocation of resources and goods. SSEF1:The student will explain why limited productive resources.

Unit 1
Fundamental Concepts
SSEF1, SSEF2, SSEF3, SSEF4, SSEF5, SSEF6
A
social science
studying the allocation
of resources and goods.
SSEF1:The student will explain why limited productive
resources and unlimited wants result in scarcity, opportunity
costs, and tradeoffs for individuals, businesses, and
governments.
a. Define scarcity as a basic condition that exists when unlimited
wants exceed limited productive resources.
b. Define and give examples of productive resources (factors of
production) (e.g., land (natural), labor (human), capital (capital
goods), entrepreneurship).
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up
when individuals, businesses, and governments confront scarcity
by making choices.
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Scarcity: Limited economic resources with
unlimited wants.
Land: Property, Natural resources.
Capital: Goods used to produce a product.
Allocate: Distribute resources to satisfy the greatest
number of needs.
Opportunity Cost: Value of the next best alternative
given up.
Trade Off: Occurs when one good is sacrificed for
another.
Labor: Work being done.
Entrepreneurship: Develops a new combination of
the other factors of production, creating something
of value.
Why is scarcity the driving force of economics?
Scarcity = a basic condition that exists when unlimited
wants exceeds limited productive resources.
“Individuals have wants that are unlimited. But the total
resources of society, including natural resources, human
resources, capital goods and entrepreneurship, are limited, so
scarcity exists. As a result, it isn't possible for everyone to have
everything he or she wants. No society has ever had enough
resources to produce the full amount and variety of goods and
services its members wanted. In a world of scarcity, producing
any one good or service means that other goods and services
cannot be produced, and trade-offs are inevitable.”-CEE
SCARCITY
LIMITED
RESOURCES
UNLIMITED
WANTS
SCARCITY
CHOICES
1. WHAT
TO
PRODUCE
2. HOW
TO
PRODUCE
3. FOR WHOM
TO PRODUCE
How does Scarcity impact economic decision making?
Why does Scarcity result in Opportunity Cost and
Trade-Offs?
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Resources and Scarcity: What’s Economics all about?
 Alaskan Wilderness Activity.
1. Limited Quantity
 2. Desirable
 3. More than 1 use.

VE4 video
 Alaska
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Land:
Capital:
-All natural resources that are -Any human made resource that is
used to create other goods & services.
used to produce goods &
Ex: oven, tractors.
services.
*Human Capital: skills or knowledge
gained through experiences.
Ex: water, sun, plants, oil,
trees, animals.
Ex: college degree.
4
Factors
Labor:
-Any effort a person devotes
to a task for which that
person is paid.
Ex. Teachers, waiters.
Entrepreneurs:
-Leaders that combine all 3
factors to create a good or
service.
Ex. Bill Gates, Jay Z
*risk takers.
1. LAND
 2. CAPITAL
 3. LABOR
 4. ENTREPRENEURS
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Your Turn: Four sections of your paper.
List an example for your product
Draw and color the example.
1. What to produce?
2. How to produce it?
3. For whom to produce it?
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The value of the next best alternative that could
have been chosen but was not chosen. What you
give up when you make a choice.
Something you give up to gain something else.
Trade-off- When one good is sacrificed for another.
Opportunity cost is what you must give up to obtain
something else, the second-best alternative.
However, what you must give up to obtain, say, a
bicycle is not really money--it is whatever other good
or service you would have spent the money on as
your next-favorite choice.
SSEF2: The student will give examples of how rational
decision making entails comparing the marginal benefits
and the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the
trade offs between two options.
b. Explain that rational decisions occur when the marginal
benefits of an action equal or exceed the marginal costs.
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Marginal Benefits: The additional gain from
consuming or producing one ore unit of a good or
service; can be measured in dollars or satisfaction.
Marginal Cost: The increase in a producer’s total
cost when it increases its output by one unit.
*Cost-Benefit Analysis: An analysis of the cost
effectiveness of different alternatives in order to see
whether the benefits outweigh the cost.
Production Possibilities Curve: All possible
combinations of two goods or services that can be
produced within a given time; 2 assumptions: 1.
Amount of resources and technology remains the
same; 2. Maximizing efficiency.
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Decisions are almost always made on the basis of
marginal cost and benefits. PACED model.
Decision making process:
 1. Define the Problem/Define Rational
2. List the Alternatives.
3. State the Criteria
4. Evaluate the alternatives.
5. Make the Decision.
**MAKE SURE WHEN YOU ARE MAKING A
DECESION THAT YOUR BENEFITS
OUTWEIGHT YOUR COSTS!
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P: What is the PROBLEM?
A: What are the ALTERNATIVES?
 What options are available to you?
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C: What are the CRITERIA important to the decision?
 What goals do you want accomplished?
 Characteristics? Which ones are important
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E: EVALUATE each alternative.
 Take each one and give it a plus (+) or minus (-).
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D: Make a DECISION!
 Which alternative meets your standards?
 What do you gain?
 What did you give up?
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Scarce Resource:
 1. Free Homework Pass
 2. Sucker
 3. 5 Points towards your next quiz.
 Use the PACED Model to make a final Decision.
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Trying to see where the best point to produce your
good or service is at.
GUNS
Guns: Capital
Butter: Consumer
2 assumptions:
1. Amount of resources
and technology remains
the same.
2. Maximizing efficiency.
BUTTER
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A: Inefficient-you don’t
have enough resources.
E: Unattainable because
you don’t have enough
resources. This is your goal.
PPC shows Scarcity,
Opportunity Cost, and
Allocation of Goods.
Also shows economic
growth.
Shifts to the Right=Increase
Shifts to the Left=Decrease
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If the Nation is currently
producing at B, How
could they get to D?
D
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a
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Invest in Technology.
Invest in more capital.
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b
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c
Productive resources.
Change in Trade
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C
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A
B
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What would cause:
A to B: increase in
technology, human
capital, more workers.
C to A: Decline in
economy,
Unemployment rises.
A: Not enough resources.
B. Most Efficient. Full
Capacity.
C. too much. Low
demand for product.
Over capacity.
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D
What if they increased
production of Guns from
6 to 15, what is the opp
cost of butter?
20 quarts of Butter were
given up to produce the
desired 15 guns.
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Now It’s Your Turn
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Practice with PPC!
SSEF3: The student will explain how specialization
and voluntary exchange between buyers and sellers
increase the satisfaction of both parties.
a. Give examples of how individuals and businesses
specialize.
b. Explain that both parties gain as a result of
voluntary, non-fraudulent exchange.
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Assignment of tasks so that each worker performs
fewer functions more frequently.
Not limited to a single factor of production.
Industrial or Regional specialization occurs.
Industrial-Assembly line- Car parts-doors, engines.
Regional- Farming, Produce.
 Idaho-Potatoes, Iowa-Corn, Texas- Oil, Cattle
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Helps reduce time and cost of the product.
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The act of buyers and sellers freely and willingly
engaging in market transactions.
The transaction benefits both the buyer and seller,
or it would not have taken place.
Non-fraudulent.
Buyers Choices on Money: Deposit into Bank, keep
it, exchange it for goods or services.
Sellers Choices on Money: Exchange goods for
cash, must feel money is more valuable than the
good.
SSEF4 The student will compare and contrast different
economic systems and explain how they answer the
three basic economic questions of what to produce,
how to produce, and for whom to produce.
a. Compare command, market, and mixed economic
systems with regard to private ownership, profit
motive, consumer sovereignty, competition, and
government regulation.
b. Evaluate how well each type of system answers the
three economic questions and meets the broad social
and economic goals of freedom, security, equity,
growth, efficiency, and stability.
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Market Economy
Command Economy
Mixed Market Economy
Profit Motive
Consumer Sovereignty
Broad Goals of Economic Systems
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Market Economy- Economic system in which
supply, demand, and the price system help people
make decisions and allocate resources; same as free
enterprise economy. What, How, Whom questions.
WRITE:
Producers and Consumers make all economic
decisions!
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Advantages
1. Variety of goods and
services.
2. Able to adjust to change
gradually.
3. Individual freedom for
everyone.
4.Consumer Sovereignty
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Disadvantages:
1. Lots of failures.
2. Not everyone's needs are
met.
3. Rewards only productive
resources; does not provide
for people too young, too
old, or too sick to work.
4. Does not produce enough
public goods such as
defense, universal
education, or health care.
 Examples:
1. Canada
2. France
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Economic system characterized by a central
authority that makes most of the major
economic decisions.
WRITE:
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The government makes all economic decisions.
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Advantages:
1. Stable
2. Efficient
3. Basic needs of
citizens are met.
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Disadvantages
1. No growth
2. Few options for consumers
3. Does not care about the
citizens of their nation.
SSEF5 The student will describe the roles of
government in a market economy.
a. Explain why government provides public goods
and services, redistributes income, protects property
rights, and resolves market failures.
b. Give examples of government regulation and
deregulation and their effects on consumers and
producers.
SSEF6 The student will explain how productivity,
economic growth, and future standards of living are
influenced by investment in factories, machinery, new
technology, and the health, education, and training of
people.
a. Define productivity as the relationship of inputs to
outputs.
b. Give illustrations of investment in equipment and
technology and explain their relationship to economic
growth.
c. Give examples of how investment in education can
lead to a higher standard of living.