Transcript factors of production cpa

Do you think like an economist?
 Answer
true or false to the following
questions.
 1. Because it is desirable, sunshine is
scarce.
 2. Because it is limited, polio (the disease)
is scarce.
 3. Because water covers ¾ of the earth’s
surface and is renewable, it cannot be
considered scarce.
 4. The main cost of going to college is
tuition, room and board.
ECONOMIC MYSTERIES
SIX CLUES TO ECONOMIC
UNDERSTANDING
1. People Economize
2. All Choices Involve Cost
3. People Respond to Incentives
4. Economic Systems Influence Individual
Choices and Incentives
5. People Gain from Voluntary Trade
6. The value of a good or service is affected
by people’s choices.
Scarcity – the fundamental
Economic Problem
 Imagine
this situation: All day you have
been thinking about making your favorite
foods brownies and scrambled eggs when
you return to your home.
Scarcity – the fundamental
Economic Problem
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You look in the refrigerator
and to your surprise there
are only two eggs left. It
takes two eggs to make
brownies and two eggs to
make scrambled eggs, so
you can’t make both. You
need to make a choice. What
is your decision?
Scarcity
 Scarcity
is the fundamental problem of
economics: how to make decisions in a
world of limited resources and unlimited
desires.
 What is a resource?
Resource: all things people can use to
make goods, or products.
What are some examples of resources?
http://www.youtube.com/watch?v=yoVc_S_g
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Scarcity, Continued
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Most resources are limited, or scarce. No matter
how wealthy a person or nation is, there are never
enough limited resources to provide everything that
everyone wants.
What resources are scarce? Can you think of
some examples?
Needs: essential for survival – water, food, shelter
Wants: anything that makes life more comfortable
Because of scarcity, people must choose how to
use resources – Which do they take care of first –
needs or wants?
Scarcity, Continued
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The reality of life is that we have limited resources
(You can’t always get what you want)
Because of scarcity we must make decisions on how
to use the resources we have.
Opportunity Cost
Because of scarcity, trade-off’s are inevitable
 Every time people make a choice about how to
use their resources, they must make a trade-off.
This means they gain something, but they also
give up something.
 Costs are not always explicit or monetary.
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Opportunity Costs are implicit – the thing
give up by making a choice is called the
opportunity cost of your decision.
you
 Individuals,
businesses, and nations face
an opportunity cost every time they decide
how to use their scarce productive
resources.
 Producing one good means not producing
other goods and services, so again, tradeoff’s are inevitable.
 Economics is the study of how and why
people make choices about the allocation,
or distribution, of resources.
Opportunity Cost continued
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What are some recent decisions you have made?
 When you make a decision, you evaluate the benefits of
each choice. The opportunity cost of making a decision
like this is the value of the next best alternatives you
could have chosen.
 It’s not always about money – could include time,
aggravation, convenience or moral guilt.
 For example, if your favorite activity is playing video
games, but you decide to do your homework instead, the
opportunity cost of your decision is the amount of fun
you could have had playing the game. The benefit of
your choice is that you don’t have to worry about doing
your homework later.
Rational Decision
 Rational
decision will play a part when
people make choices.
 When making a rational decision, you will
weigh the benefits and costs of each
option.
 Then we choose the option whose benefits
(in our opinion) outweigh its cost. This kind
of decision making is also called a costbenefit analysis.
Warm Up: what is the opp. Cost
of your decisions?
Decision
You decide to play a
sport after school
instead of getting a part
time job.
You decide to go out to
eat instead of to a
movie
You decide to go to a
party instead of
studying
Opportunity Cost
Unlimited Wants
Scarcity
Limited
Resources
Choices
3 Basic Economic Questions
What to
Produce?
How to
Produce?
For Whom
To Produce?
Types of
Productive Resources
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The things people need to make and sell products are called
productive resources or factors of production. There are 4
important productive resources.
1. Land: Land resources include not only the land
itself, but all the natural resources on the land, as well
as any improvements people have made to the land.
“gifts of nature”
Examples: water, air, mineral deposits,
forests, land
Types of
Productive Resources
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2.Labor: The process of making
things requires labor, the mental
and physical efforts of human
workers.
For example, running a business
might require workers to operate
machines, load boxes, drive
trucks, answer telephones, write
letters and track orders on a
computer.
Types of
Productive Resources
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3.Capital: are human –made resources used to
make other products or deliver services.
Businesses need both physical capital and
human capital.
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4.Physical Capital: refers to all the tools,
machines, and other equipment a business
needs. For example: a restaurant needs stoves,
refrigerators, pots and pans, tables and chairs.
Types of
Productive Resources
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Human capital: refers
to the skills and
knowledge of a
company’s workers.
 The value of the
health, education, and
skills of people
4. Entrepreneurship
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An entrepreneur is a person who starts and
manages a business.
They come up with ideas about how to produce
something that they think people will want to
buy.
Organize all the land, labor and capital
resources needed to produce the good or
service.
Risk Takers: invest money in a new business.
Without entrepreneurship, no goods and
services would ever be produced.
London 2012 Olympics
 What
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types of productive resources…
Land
Labor
Capitol
• Human
• Physical
…are being used in the London Olympics right
now. Discuss in a small group and list
examples for each resource in your notes.
Georgia Performance Standards
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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.
 d. Define opportunity cost as the next best
alternative given up when individuals,
businesses, and governments confront scarcity
by making choices.