Activator

• During the holiday season of 1996, a children's toy appeared on Good Morning
America. The toy, produced by Mattel, had sat on the shelves with very little sales until it
appeared on the show. After the toys appearance, its popularity improved and it became
the most sought after product of the holiday season. Unfortunately, Mattel did not
anticipate the doll’s popularity, only producing 400,000 units, and were not able provide
the product in a timely manner at the store level (over 1,000,000 were in demand).
Elmo was sold for as much as $2500
through a classified ad
 Elmo Videos
1. Elmo Commercial

2. Elmo Good Morning America

 Fundamental Economic Concepts
Scarcity and the Factors of Production
 Scarcity - fundamental problem facing all people; unlimited wants
and limited resources to satisfy those wants
 The Basic Economic Problem:
 We want more than we can have!
 Humans' wants and needs are infinite, while the resources needed to satisfy
those wants and needs are limited and scarce.
 Scarcity
 What makes something scarce?
 Something is scarce when it is both limited and desirable
 e.g. - Lebron James, oil, time, rest,
grass in the winter (north) etc.
 Scarcity applies to everyone
 Scarcity represents permanent problems that cannot be solved
 Application Question
 List three things that you feel are scarce in your life,
what has caused them to become scarce?

Sleep!
Scenario: Simulation Questions
You and your group members represent a small society.
You have been given a resource that is in a paper bag.
You must figure out how to allocate (distribute) this
limited resource amongst your society.
1. What is the fundamental problem with your
scenario?
2. You have limited resources, brainstorm different
ways that you might distribute your resources. What
is your group’s decision?
How to allocate (distribute) scarce resources
Who gets scarce stuff?
 Scarcity and Specialization

$7.25 an hour $65,000 a year $21.1 Million a year

 What is Economics?
 Economics – the study of choices; how individuals
and groups seek to satisfy their wants and needs
in light of scarcity
 What are the resources necessary to produce?
Factors of Production
 Factors of Production - resources required to produce goods and
services
•
Land
Land – natural resources not created by human effort that are
used to produce goods and services
• The "gifts of nature".
• Examples: Forests, fish, oil, gas, cattle, etc...
 Labor
• Labor – time and effort devoted to producing goods and services.
• “The Workers”
• Labor resources are those provided by the body and minds of
men and women.
• Examples: Cashier at Wal-Mart, teachers, construction workers,
etc...
3 Types Capital
1. Physical Capital – also known as Capital Goods, human made objects used to
create other goods and services
 Examples: Machines, phones, computers, equipment

2. Human Capital – skills, abilities, and specialized talents of people

 Examples: College, training, technical school, etc.

3. Financial Capital – money, used by businesses to invest in their business

 Examples: money
 Entrepreneurs
• Entrepreneurs – business owners who organize the factors of
production to bring stuff to the market
• Entrepreneurs are the "risk takers" who produce a good or service
that they believe will succeed in the marketplace.
 Factors of Production
Land Capital Labor Entrepreneur

+ + +

=
Classify the Factors of Production in the following scenario:
•You decide to order a pizza to satisfy your wants. First, you picked up the telephone and gave
your order to the owner that entered it into her computer. The information came up on the
chief baker’s monitor in the kitchen and he assigned it to one of his cooks. The cook cook used
his knowledge of mixing dough out of salt, flour, eggs, and milk. The cook finished mixing
dough, washed his hands in the sink, and prepared your pizza using tomato sauce, cheese, and
sausage. He then placed the pizza in the oven. Within 10 minutes the pizza was cooked and
placed in a cardboard box. The delivery person then grabbed your pizza, jumped in the company
car, and delivered it to your door.
Classify the Factors of Production in the following scenario:
Entrepreneur
1. Owner _________________________________
2. Computer _________________________________
Physical Capital
3. Chief baker’s monitor _________________________________
Physical Capital
Labor
4. Cooks _________________________________
Human Capital
5. Knowledge of mixing dough _________________________________
Land
6. Salt, flour, eggs, and milk _________________________________
Physical Capital
7. Sink _________________________________
Land
8. Tomato sauce, cheese, and sausage _________________________________
Physical Capital
9. Oven _________________________________
Labor
10.Delivery person _________________________________
Physical Capital
11.Company car _________________________________
 Scarcity Videos
 Water Scarcity

 Water Scarcity Part 2

 Scarcity Video
Examples of Factors of Production
Land Labor Capital Entrepreneurs
1. 1. 1. 1.

2. 2. 2. 2.

3. 3. 3. 3.
Factors of Production
Practice Questions
Practice Questions
• The most advanced economy with updated
technologies and skilled workers still cannot
have everything that it wants. The fact that
people have limited resources to deal with
unlimited wants is known as
a) Comparative advantage
b) Scarcity
c) Opportunity cost
d) Specialization
The following represent situations in the economy:
 Situations
1. Business is good and firms are actively hiring workers.
2. Many individuals are starting business.
3. Employees wages are rising.
4. Consumer’s are making more money and saving more.
 Which of the following above represents the concept of
entrepreneurship?
A. Situation 1
B. Situation 2
C. Situation 3
D. Situation 4

Needs vs. Wants
Need – a basic requirement for survival
 e.g. – food, clothing, education, etc…

 Want – not a basic requirement for survival; a means of expressing a need

 e.g. – cheeseburger, Abercrombie and Fitch,
University of Georgia, etc…

OR
 Goods
 Good – physical, tangible(touchable) product
 i.e. – Automobiles, Video Games, Cell Phones, CD’s,
Tickle Me Elmo, etc…
 Services
 Service – a non-tangible action or activity
that is performed for someone else
 i.e – Financial Advisor, Stock Broker, Movies, Dentist,
Teachers, etc..
 Show 4/5Commercials for
following Chart
 Jean Claude Volvo
 Nextel
 Defective Treadmill
 Michael Jordan
 Moomba
 Swagger Wagon
 Goods and Services Chart
Item
Good/Service Want/Need Market
advertised
1. Volvo 1. Good 1. Want 1. Truckers
Trucks 2. Service 2. Want/Need 2. Consumers
2. Credit 3. Good 3. Want/Need 3. Consumers
Card 4. Good 4. Want/Need 4. Athletes
3. Reebok 5. Good 5. Want 5. Parents
4. Gatorade
5. Mini Van
 Goods and Services Chart
Item
Good/Service Want/Need Market
advertised
1. Volvo 1. Good 1. Want 1. Truckers
2. Credit 2. Service 2. Want 2. Consumers
Card 3. Service 3. Need 3. Business
3. Nextel 4. Good 4. Need/Want People
4. Reebok 5. Good 5. Want 4. Consumers
5. Mini-Van 5. Parents
 Daily Assignment Chapter 1 Section 1
1.Who does scarcity apply to? Explain
2.List a good and a service that you have purchased in the past month.
3.What are some things that you have that might be considered wants by other
societies? Explain why.
4.Last year, you were trying to make a decision on what kind of car you wanted
your parents to buy you for your birthday. You had two choices: 1) 1984, Honda
Accord for $2,000, or 2) 2010 fully stocked Infiniti G37 for $52,000. Which one of
these would be considered a want, and which one a need and why?
5.“Hank” works two jobs, one in the morning and one at night. At his morning job
he sells furniture at a furniture store. At his night job he works as a computer
technician. Which one of his jobs creates a good and which provides a service?
6.Microsoft offers all of their employees the opportunity to attend the local
university for a higher education, free of charge. What would be the motivation
for investing in human capital?
7.Which factor of production is represented by each of the following? (a) an office
building, (b) an assembly line worker, (c) a tree used to make paper, (d) unused
soil, (e) Oprah Winfrey
Short Answer 2-6
Directions: On a 3 column chart, label it as shown below. In the second
column, list 3 possible alternatives that you could have made other than
your choice to come to school. In the third column, list the alternative that
you would have desired the most.
What you would have
Choice Three Alternatives done if you didn’t come
to school
Coming to 1. 1.
Economics
Class 2.

3.
 Tradeoffs
 Trade-off – giving up one thing in order to gain another
 “There is no such thing as a free lunch.” (TINSTAAFL)

 Who faces tradeoffs? Everyone

 Opportunity Cost
 Opportunity Cost – used by economists to measure the
cost of decision-making; the value of the what we give up
 Next best alternative use of money, time, or resources

Sleeping (Opportunity Cost)

Coming to Economics
 Trade-Offs
 Individuals and Trade-Offs – studying one subject vs. another,
watching TV or working out, etc.
 Business Trade-Offs – producing iPod vs. iPhone
 Society and Trade-Offs – “guns or butter”, military or consumer
goods
 Decision-Making Grid
or

Criteria
Alternatives Immediate Long Term Entertaining Immediate Necessary for
Satisfaction Benefits Financial Long-term
Benefits success
90 minutes of Sleep No
Yes Yes No No
90 minutes of Yes Yes Yes No Yes
Economics
 Decision-Making Grid
or

Criteria
Alternatives Immediate Long Term Entertaining Immediate Necessary for
Satisfaction Benefits Financial Long-term
Benefits success

Sleep Yes No Yes No No

Economics Yes Yes Yes No Yes
Thinking at the Margin
Slice Marginal Benefit
1 10
2 9
3 8
4 4
5 2
6 0
7 -2
8 -10
 Thinking at the Margin
Hour Sleep Planning

6:15 Normal wakeup time ---

6:30 Gain 15 minutes of sleep Cost 15 minutes of planning

6:45 Gain additional 15 minutes of sleep
Cost 15 minutes of planning
 Thinking at the Margin
Hours Pay Play

40 $9.00 40 hours of play

41 13.50 1 hour playing video games

42 13.50 1 hour with family

43 13.50 1 studying economics
 Thinking at the Margin
 Margin – an increment (small
unit), a border/edge
 Thinking at the margin –
analyzing the costs and benefits
of incremental (small) decisions
 Production Possibilities Frontier Activity
 Identify Factors of Production:
 Land
Paper _____________________________ Links Smiles
 Pencil, scissors, roll of tape
Physical Capital
________________________
 Laborers
Group members ______________________________
 You will have 3 5 minute rounds of production:
 2 sheets folded in pattern a
 Round 1: Make only links
 Round 2: Make only smiles
 Round 3: Make half smiles and half links
 Round 4 (fired worker 1 paper):
Make half smiles and half links
 Round 5 (rehired 4 pieces of paper plus extra
scissors: Make half smiles and half links
1. What resources were scarce in the activity? ___Paper, scissors, time, workers,
tape
2. What was the opportunity cost of producing all smiles? Links
3. What was the opportunity cost of producing all links? Smiles
4. When did you experience underutilization/inefficiency? Supply shock, shortage
of resources
5. How does this relate to the real world? Depression, Katrina, natural disaster
6. What allowed you to produce at a point outside the curve? More resources
7. How does this relate to the real world?
 Production Possibilities Frontier Activity
Round Smiles Links
 Production Possibilities Frontier Activity
Round Smiles Links
 Production Possibilities Model
What is the PPC Model?
PPC Model – shows/illustrates the
possible combinations of goods and
services that can be produced by a
single nation, firm or individual given
the productive resources available
What does it show?
That nothing is free and that
everything has an opportunity cost
 If society wants more of one thing
then it must give up something in
return
Used to visually represent opportunity
cost
Basics of the production possibilities frontier model

Currently unattainable point

A
E

B Efficient use of
resources
Inefficient Use of
Resources/
Underutilization

D
C

1,000
 Production Possibilities Model
•What basic economic Computers

concepts can it be used to

model?
1. Scarcity 3,000 F Production
Possibilities
2. Tradeoffs Frontier
2,200 A
3. Opportunity cost 2,000 B
4. Efficiency
5. Underperformance
6. Unreachable points 1,000

E
0 300 600 700 1,000
Cars
 Production Possibilities Curve
 Efficient – maximum production; using resources wisely*
Points along the curve, (a – c) *

Efficiency
 Underutilization (Inefficiency)
 Underutilization – less than maximum production; using fewer resources
than a person/economy/business is capable of.
 Points inside the curve, d (inefficient use of resources)

Underutilization
/Inefficiency
 Unattainable Point
 Unattainable Point– currently unreachable point of production
 Only reached through more efficient resources

Unattainable
 Shifts in the PPF
Increase in available resources Decrease in available resources

56
 12 PPC Activity Good A Good B
10 0 12
1 10
8
Good B

2 8
6 3 6
4 4 4
5 2
2
6 0
0 1 2 3 4 5 6
Good A
Answer the following questions based on the model above:
1. The opportunity cost of increasing production from Good A from zero units to
2
one unit is the loss of __________ unit (s) of Good B.
2. The opportunity cost of increasing production from Good A from one unit to
2
two units is the loss of __________ 4
unit (s) of Good B. The total loss is ____
3. The opportunity cost of increasing production from Good A from zero units to
12
6 units is the loss of _________ unit (s) of Good B.
 Review - Guns or Butter PPF
1. How many guns can be produced when no butter is produced? ________ 50
2. How much butter can be produced when no guns are produced? _______ 60
3. The opportunity cost of increasing the production of guns from 0 to 40 units
30
is ________ units of butter.
4. What would it say about this society if the production decision was to
produce at the (45, 20) point; assuming that it takes 30 units of butter to
provide basic foodstuffs to society and 40 units of Guns to protect their
This society cares more about military than providing consumer goods for the people
society? ___________________________________________________
 A PPF Exercise
200
B
180
160
140 80
C
120
100 25
D 55
80 40
60 80

40
20
E

5 10 15 20 25 30 35 40 45 50 55 60
PPF Exercise
1. True
2. False
3. True
4. True
5. False
 Efficient points of production
1. What do points Q, R, T and V represent? __________________________________________
2. What does an efficient use of resources mean? ____________________________________
Maximum production
3. How much food and computers are being produced at point R?
•Food ______________
10
•Computers ______________
6
4. If we move from point R to T, how many computers are gained and how much food is lost?
•Computers gained ___________
3
•Food lost ____________
2
5. What is the term used to describe the cost of increasing one item in order to produce the
Opportunity Cost
other item? ________________________________________
6. What terms could be used to describe this PPF if production was at the 5, 5 point of the
graph? _______________________________________
Underutilization, Inefficiency
7. What might have caused the condition in the previous question?
__________________________________________
Recession, negative supply shock, technological breakdown, etc.
8. Illustrate economic growth by labeling a “z” point on the PPC diagram above.
9. What are some factors that might contribute to economic growth to allow us to reach that
point?
Increased resources, more oil, technology, etc.
___________________________________________________________________________
 1
•The opportunity cost of increasing production of Good A from 0 units to 1 unit is the loss of _______ unit(s) of Good B.
3
•The opportunity cost of increasing production of Good A from 1 unit to 2 units is the loss of _______ unit(s) of Good B.

8
•The opportunity cost of increasing production of Good A from 2 units to 3 units is the loss of _______ unit(s) of Good B.

4
•The opportunity cost of increasing production of Good A from 0 units to 2 units is the loss of _______ unit(s) of Good B.

12 unit(s) of Good B.
•The opportunity cost of increasing production of Good A from 0 units to 3 units is the loss of _______

•The opportunity cost of increasing production of Good B from 11 units to 12 units is the loss of 1
_______ unit(s) of Good A.
2
•The opportunity cost of increasing production of Good B from 0 units to 11 units is the loss of _______ unit(s) of Good A.
1) Suppose there are major technological innovations in both capital and consumers goods in the
economy. Which curve in the diagram would represent the new production possibility
CC
curve?__________
2) Suppose there is a major technological breakthrough in ONLY the consumer goods industry, and the
new technology is widely adopted. Which curve in the diagram would represent the new production
BD
possibilities curve? __________
3) Suppose there is a major disaster in the economy, which curve represents the most likely production
AA
possibilities curve? ___________
4) If “BB” represents a country’s current production possibilities frontier, what can you say about a point
like x? ________________________________________________________________
Unattainable
 X

1) Indicate by drawing an 'X' a point where production is currently unattainable.

2) To achieve this currently unattainable production combination, what must happen?
More resources/technology
__________________________________________________________________________________
Indicate by drawing a 'Y' a point where production is currently inefficient; where the economy is
currently underutilizing its resources.
5 10

25 25
15 15
 Today’s Assignments
 Short Answer Opportunity Cost and the PPF
pgs. 8-18
 Today’s Assignment
1. Production Possibilities Curve Open-Notes
Quiz
2. What is Economics? Open Notes Quiz (Ch.1)
 321 Summarizer
1. Write 3 things you learned today.
2. Write 2 ways that this lesson can apply be useful to your
life.
3. Write 1 question you still have
 Essential Question 1 + 2
1. Why is scarcity a permanent
condition?
•Scarcity reflects the limited resources of a society,
but unlimited wants of it’s members.
2. What are the four factors of
production and an example of each?
1. Land – natural resources, oil
2. Labor –human resources, workers
3. Capital – machines, computers/robots
4. Entrepreneurs – business owner, Bill Gates
 Essential Question 3, 4 + 5
3. Why does every decision involve a trade-off?
•We always give up something to get something else
4. What does opportunity cost measure?
•The cost of the next best use of time money or resources
5. What does it mean to think at the margin?
•Thinking about small decisions and the marginal costs and marginal
benefits of those decisions.
 Essential Question 6
6. What is illustrated by the PPC Model; what 3 production possibilities are shown?
•The tradeoff between two goods.
• inefficiency/underutilization, efficiency, currently unattainable

a
 Opportunity Cost
http://www.mhhe.com/economics/solman_video_mov/opp_cost.mov
http://highered.mcgraw-hill.com/sites/9970960097/student_view0/paul_soloman_videos.html
 The Economic Revolution: from
“The Worldly Philosophers”
 Reading discussion questions:
 How is the struggle against scarcity a struggle for survival of man?
 Is man by nature a social creature? How does man's nature pose a challenge to his
survival? Discuss...
 Discuss the benefits and dangers of the two ways societies organized economic activities
throughout most of human history
 -tradition
 -command
 Why was there no need for "economists" throughout most of human history?
 "It was not at all obvious that with each man out only for his own gain, society could in
fact endure. It was by no means clear that all jobs of society - the dirty ones as well as the
plush ones - would be done if custom and command no longer ran the world. When
society no longer obeyed one man's dictates, who was to say where it would end?"
 Evaluate the author's claim that the economic revolution was "fundamentally more
disturbing by far than the French, the American, or even the Russian Revolution."
 Extra Credit
1. Draw a basic PPF that illustrates a
personal opportunity cost.
2. Give an example of a tradeoff that
you recently experienced, explain the
opportunity cost of the decision.
 Due Today 8-16
1. Scavenger Hunt
2. PPF Activity (Links and Smiles)
3. PPF Practice 1
4. PPF Practice 3
5. Study Guide Ch 1
6. Terms Ch. 1
7. Notes Chapter 1
8. Daily Tens (5)
9. Essential Questions (5)
 Include on Test
1. Name
2. Date (8-16)
3. Block 2
4. Test – Basic Economic
Concepts
5. ID: A, B or C
 Fundamental Economic Concepts
 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.
 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.
Extra Credit
1. Which points are attainable and desirable?
2. Which point(s) are attainable but not desirable?
Give an example of what could have caused this
point on the model.
3. Which point (s) are unattainable; what could
allow society to one day reach that point?
 Chapter 1 Study Guide
1. Scarcity
2. Scarcity is a permanent condition for all people,
“unlimited wants, limited resources”
3. The study of choices; how people deal with scarcity
4. Need/Want – expresses a need, not a necessity
5. Good – tangible (pencil), Service – nontangible (doctors
appointment)
Resource Factor of Production Resource Factor of Production

Water Land Tractor for a Capital (Physical)

farmer
Land
Construction Worker Labor Dough for Fox’s
Pizza
Business Owner Entrepreneur Ipad for a Capital (Physical)
business
Camera for a News- Capital (Physical) Robots for a Capital (Physical)
station Chevrolet Car
McDonalds Cash Capital (Physical) Cattle Land
Register
McDonalds Cashier Labor Jay Z Entrepreneur

Mechanic at Tire Labor Teacher at GA Labor

Kingdom
Tomatoes for a Land Office building Capital (Physical)
Complete the following tables based on the likely resources needed to complete the following tasks:
1) Pizza Company

Land Labor Capital

1) Dough 1) Cashier 1) Oven

2) Pepperoni 2) Delivery person 2) Pan

3) Tomato Sauce 3) Pizza maker 3) Register

7. Human Capital
 Chapter 1 Study Guide
8. Give up something to get something else
9. Opportunity
10. Always give up something to get something else
11. Yes, save $40
12. Individual
13. Business
14. Social
 Chapter 1 Study Guide
15.A visual illustration of the tradeoff of two goods
16.Increase in resourses/technology
17.Recession, increased labor laws, lazy workers, etc.
 No
Unattainable, not enough resources
Outside
200
50
Inefficient, underutilization
Unemployment, technological breakdown, natural disaster, etc.
Production Possibilities Frontier
• A through F are
attainable
• I represents
inefficient use of
resources
• U represents
unattainable
combinations

93
Work
Constant vs. Increasing Costs
4
30
3 29

25
2

1 15

0
1 2 3 4
Play
 The Desk Dilemma
 Reflection questions (to be answered with your group, each person
should have a record of their group’s responses):
1. How does this reflect real world conditions In our economy?
2. What factors prevent us from having everything that we want?
3. How does the United States cope with scarcity?
4. Why is scarcity a permanent condition in all societies?
5. Why is this problem not just an issue of rich/poor?
 “The Desk Dilemma”
 Our classroom represents an economy based on a system of “haves” and “have-nots”.
 Your teams’ job is to problem solve based on the scenario. Determine how to allocate the
scarce resources (seats) in light of the unlimited wants of haves and have-nots. Be prepared
to present and support your decisions.
 Requirements:
 Each group needs a spokesperson to communicate their plan

- Your plan should address the following issues:

 How do you plan to handle the lack of space? (price system, social welfare, etc.)

 “Haves” – how are you going to philosophically and practically deal with the “have-
nots”?
(exclude /include them from society)
 “Have-nots” – what do you want from the “haves”, what is the solution from your
perspective?
 Thinking at the Margin
Hours Pay Opportunity Cost

40 $9.00 40 hours of play

41 13.50 1 hour playing video games

42 13.50 1 hour with family

43 13.50 1 studying economics