Economics Unit 2 Scarcity (PPT)

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Scarcity and Scarcity and Making Rational Making Rational Decisions Decisions

Transcript of Economics Unit 2 Scarcity (PPT)

Page 1: Economics Unit 2 Scarcity (PPT)

Scarcity andScarcity andMaking Rational Making Rational

DecisionsDecisions

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What do you know?

Answer this question in at least 4 sentences:

What should you consider when making a major life

decision?

Can you define these terms?•Scarcity•Benefit•Cost•Incentives•Rational •Allocate

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By the end of this lesson you should know….

Essential Questions•Why do people have to make decisions? •How do you determine the use of productive resources you own? •What did our school give up when it chose to _____(fill in a local school decision students find interesting)____________________? •How does making a budget demonstrate the concept of scarcity? •Why should people weigh the advantages and disadvantages of different alternatives when making choices? •What does it mean to be “rational”? •How do we determine that decision we make is “rational”? •What methods can we use to help us make our choices more rationally? •How does self-interest influence human decision-making?

TermsContent Terms•Scarcity•Opportunity cost•Incentives•Durable•Microeconomics•Macroeconomics•Standard of Living•Productivity

Academic Terms•Rational •Allocate•Invest

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By the end of this lesson you should know….

Georgia Performance StandardSSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments. 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. b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.

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. 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.

SSEPF1 The student will apply rational decision making to personal spending and saving choices. a. Explain that people respond to positive and negative incentives in predictable ways. b. Use a rational decision making model to select one option over another.

Literacy StandardsRH.11-12.3 Cite thorough textual evidence to support analysis of what the text says explicitly as well as inferences drawn from the text, including determining where the text leaves matters uncertain.RH.11-12.7 Integrate and evaluate multiple sources of information presented in different media or formats as well as in words in order to address a question or solve a problem.WH.11-12.1 Write arguments to support claims in an analysis of substantive topics or text using valid reasoning and relevant and sufficient evidence.WH.11-12.3 Write narratives to develop real or imagined experiences or events using effective technique, well-chosen details, and well-structured event sequences.

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What is a Rational Decision?

A rational decision is not just a decision made by evaluating all choices, it is a decision that takes into account the reason for making the decision.Decisions should be made taking individual and national goals into account because of scarcity.

– Scarcity is the concept that people and countries have unlimited wants but limited resources. This forces people to make choices and when you make a choice, there is always a cost.

Whether it is a country, a business or an individual, every time a choice is made there will be an opportunity cost. This is why making a ration decision is so important.

Rational- consistent with logic; sensible

Opportunity Cost- the next best alternative

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Micro ExampleKristina just won $1000 check from an essay contest. It is almost summer and the first thing that came to her mind was to take a vacation with the money, but she does have other options. She is going to college in the Fall and her car needs breaks and new tires.

How should Kristina make a rational decision with her resources?Things to consider:•Goals •Current situation•Important Criteria for the results you desire•The cost and benefit of each decision

Microeconomics- the study of decision making and behavior of individuals and firms

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Micro Example cont..Kristina just won $1000 check from an essay contest. It is almost summer and the first thing that came to her mind was to take a vacation with the money, but she does have other options. She is going to college in the fall and her car needs breaks and new tires.

Answer the following Questions:

1. What are Kristina’s wants? What are her limited resources?

2. If you were in Kristina situation, what would be your top 4 options for spending the money?

3. How would Kristina explain choosing to go on vacation with the money?

4. How would Kristina explain spending the money to fix up her car?

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Decision Making Grid

Will help make money

Durable Good/Service

No additional expense above

$1000

Multiple Uses Totals

Vacation

Car Repair

Computer for college

Prom

One tool that can be used to evaluate decisions using important criteria is a decision making grid. 1.List your top 4 choices2.Determine the criteria important to your current goals and/or situation (list criteria in order of importance)3.Complete the chart by checking the criteria box if the answer is yes

Durable- good that will last at least 3 years

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Decision Making Grid

Will help make money

Durable Good/Service

No additional expense above

$1000

Multiple Uses Totals

Vacation 0

Car Repair X X X 3

Computer for college

X X X 3

Prom X 1

Based on the results of using the decision making grid, what should Kristina choose? What is her opportunity cost?

Why should she choose the car over the computer if they scored the same?

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Can you think of other tools or methods you can use to make rational decisions?

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More MethodsAnother way to make a rational decision is to do a cost benefit analysis. Imagine in Kristina’s case that she couldn’t decided to buy the computer or the car repair. That both of them were equally desirable. How should she choose between the two?If both options are equally beneficial but the car repair was $500 and the computer was $650, then Kristina should pay for the car repairs because she gets the maximum benefit for the lowest cost.

Assessment - Complete one of the following:1.Write an example of when you have used cost benefit analysis.2.Use the decision making grid to analyze a choice you will have to make soon.

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Macro ExampleEvery country faces the problem of scarcity. Countries have limited resources but their people have unlimited wants so a choice must be made. Consider the following example:

In the 1950’s the US government(and the UN) were asked by South Korea to send troops to help them fight Communism. The country was in the midst of a Cold War, and ideological battle between Democracy and Communism and our policy at the time was to try to contain Communism as we felt it was a very dangerous threat. There were also domestic issues the country was facing. The post war baby boom made it necessary to provide education to an increased population of youth and since the Cold War was fought through intelligence, there was a real constant threat of spies trying to steal national secrets and technology.

Macroeconomics- the study of the economy as a whole and decision making by governments and large units

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EXPLAIN YOUR DECISION

If you were the President of the United States, what criteria and information do you need to consider in order to make a rational decision? How will you justify your decision to the American people?

Write a speech:As if you were the President of the United States. Explain to the people how you have

decided to use the country’s resources, what it will cost them and why it is worth it.

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So farcan

you…

Answer these Questions?•Why do people have to make decisions? •How do you determine the use of productive resources you own? •What did our school give up when it chose to _____(fill in a local school decision students find interesting)____________________? •How does making a budget demonstrate the concept of scarcity? •Why should people weigh the advantages and disadvantages of different alternatives when making choices? •What does it mean to be “rational”? •How do we determine that decision we make is “rational”? •What methods can we use to help us make our choices more rationally?

Define these Terms?ScarcityOpportunity costDurableMicroeconomicsMacroeconomics

Can you…•List a variety of strategies for allocating scarce resources. •Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices. •Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs. •Use a rational decision making model to select one option over another.

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We still need to …

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. 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.

SSEPF1 The student will apply rational decision making to personal spending and saving choices. a. Explain that people respond to positive and negative incentives in predictable ways. b. Use a rational decision making model to select one option over another.

Define these Terms•Allocate•Incentives•Invest•Standard of living•Productivity

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Investment is KeyFor both individuals and governments the key to growth is investment. Goals should always be involved in the equation when making decisions. Allocating resources to education, technology and equipment can lead to increased growth in the future.•For the individual and the business this can mean a higher income or more profit.•For governments this can mean a higher standard of living for the population.

Let’s research

Allocate- distribute for a specific purpose

Standard of living- quality of life based on the level of wealth, happiness, comfort, material goods and necessities available

Invest- to devote resources with the expectation of profit or material result

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Based on this data published in March 2014 from the US Bureau of Labor Statistics

1. What are the benefits of investing time and money in your own education?

2. What are the costs of investing your resources in a different alternative?

Individual Investment

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Making rational decisions with money involves creating a budget. Complete the monthly budget sheet on the right using the data from the previous chart for both a high school graduate and a person with a Master’s Degree.

$2,672 per month for HS Grad$5,304 per month for Masters

HS Master’s

Income $2,672 $5,304

TransportationCar/BusInsuranceRepairsGas

FoodGroceriesEating Out

LivingRent/MortgageCablePhoneUtilitiesClothingFun

AccountsCredit CardsLoans

Savings

Individual Investment

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Answer the following question in groups:What is the difference in your standard of living with a HS diploma versus a Master’s Degree? (think more than just numbers)

What incentive do you personally haveto continue your educationafter High School?

Individual Investment

Incentive- something that incites action or effort; can be positive-reward or negative-punishment

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• The most important factor in economic growth is using resources efficiently and increasing productivity.

• Governments invest in education, research and development in order to increase productivity which will lead to efficient workers, more productive resources, more producers, more jobs and more money flowing through the market.

• This increases the standard of living for the whole country.

One example of an area of investment for countries around the world is

renewable energy. How can this investment increase a

countries productivity?

Government Investment

Productivity- the amount of output produced with a given amount of resources

Click this link to see how countries compare in

renewable energy investment.

http://www.theecologist.org/News/news_analysis/829664/revealed_how_your_country_compares_on_renewable_investment.html

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Government Investment cont…

One example of government investment is in renewable, alternative and solar energy.

AssessmentOn a sheet of paper create a poster that:•Illustrates the benefit of investing in this type of energy research•Speaks to your audience, the American people because it is their tax dollars that fund the research•Make sure it conveys that the benefit of this investment, outweighs the cost

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Can you…

Answer these Questions?•Why do people have to make decisions? •How do you determine the use of productive resources you own? •What did our school give up when it chose to _____(fill in a local school decision students find interesting)____________________? •How does making a budget demonstrate the concept of scarcity? •Why should people weigh the advantages and disadvantages of different alternatives when making choices? •What does it mean to be “rational”? •How do we determine that decision we make is “rational”? •What methods can we use to help us make our choices more rationally? •How does self-interest influence human decision-making?

Define TheseTerms?

Content TermsScarcityOpportunity costIncentivesDurableMicroeconomicsMacroeconomicsStandard of LivingProductivity

Academic TermsRational AllocateInvest

Complete these Standards?•Explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments. •List a variety of strategies for allocating scarce resources. •Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices. •Give examples of how rational decision-making entails comparing the marginal benefits and the marginal costs of an action. •Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs. •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. •Give illustrations of investment in equipment and technology and explain their relationship to economic growth. •Give examples of how investment in education can lead to a higher standard of living. •Apply rational decision making to personal spending and saving choices. •Explain that people respond to positive and negative incentives in predictable ways. •Use a rational decision making model to select one option over another.

Sample Questions

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Try These Questions from the Released EOCT

1. What basic economic problem do both higher-income nations and lower-income nations have in common?

A. too many unskilled laborersB. lack of capital goods C. too much governmentD. scarcity of resources

2. Which of the following is an example of a microeconomic decision?

A. whether to increase or decrease the money supply

B. whether to increase or decrease taxes

C. how to reduce the unemployment rate

D. how many hours an employee should work each week

3. An individual decides to pay $8 to see a movie instead of buying an $8 meal. What is the opportunity cost of the movie?

A. the satisfaction missed by not eating the meal

B. the $8 paid to see the movieC. the time spent watching the movieD. the satisfaction received by going to

the movie4. Which of the following is MOST

important for economic growth?A. efficient use of resourcesB. ample tax revenuesC. availability of resourcesD. a large labor force

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Answers1. D2. D3. A4. A

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Resources• “Employment Projections” US Department of Labor Bureau of Labor Statistics

http://www.bls.gov/emp/ep_chart_001.htm • USASpending.gov

http://www.usaspending.gov/ • “2010 Global Clean Energy Snapshot” The Ecologist

http://www.theecologist.org/News/news_analysis/829664/revealed_how_your_country_compares_on_renewable_investment.html

• Georgia Department of Education’s Economics/Business/Free Enterprise EOC Assessment Guide– http://www.gadoe.org/Curriculum-Instruction-and-Assessment/Assessment/Documents/

Milestones/Assessment%20Guides/GM%20Economics%20EOC%20Assessment%20Guide%20081715.pdf

• Economics GPS Frameworks: Unit 2-”The Choice is Yours”– https://www.georgiastandards.org/Frameworks/GSO%20Frameworks/Economics%20Unit

%202.pdf• Georgia Department of Education Released EOCT’s and answer keys

– http://www.doe.k12.ga.us/Curriculum-Instruction-and-Assessment/Assessment/Pages/EOCT-Released-Tests.aspx