Period 1 (Aug. 14), Period 2 (Aug 14), Period 4 (Aug 15)
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Transcript of Period 1 (Aug. 14), Period 2 (Aug 14), Period 4 (Aug 15)
Agenda Review Class Rules Review Key Terms Homework Article Worksheet Student Video Lecture – Production Possibilities Curve Production Possibilities Worksheet Introduction to Chapter 2 HOMEWORK
Read Chapter 2, Q. 1 – 6Review Powerpoint for next class (online)Read “Current Reading Assignment” (online)
Cycle 1, Day 1
Class RulesBe on timePay attentionBe preparedDon’t use cellphones
• Comments• You are responsible to monitor your grade
• You are responsible to seek help (e-mail is best way to contact me)
Absences
You are responsible for…• Getting the material
• Reviewing the Class Presentations (posted on my faculty webpage)
• Getting the homework assignment, reading assignment, etc.
Absences (continued)
Tests…
You need will make-up the test at detention when you return.
You will receive a ZERO if you have not made arrangements and I return the test.
E-mail is the best way to make arrangements to take the test.
Additional Class Materials
Multi-Colored pens (or pen)One inch three ring binder
Laptops, kindles, iPads, etc.
Yes, you can use them.
Economics is….The study of human behavior. How people
allocate limited resources to produce goods and services to satisfy unlimited needs and wants.
Remember…resources are always scarce, always limited
Key Terms…
Four Factors of Production (resources)1. Land
All Natural resourcesExample - Oil, Coal, Trees
2. Labor People producing a good or service
Example – Auto worker, Lawyer, Teacher
3. Human Capital• Training for Labor
Example – College Education, Seminars
4. Physical Capital Tools used by labor to make goods and services
Example – Computers, Buildings, Factories, desks
Key termsScarcity vs. shortageNeed vs. wantGood vs. ServiceTrade-off vs. Opportunity CostEntrepreneur
Scarcity vs. shortage
Scarcity is permanent
Shortage is temporary
Temporary may be days, weeks months or even years
Need vs. Want
Need = gotta have itWant = nice to have it
For each person to decideCellphone example
Good vs. Service
Good• Tangible• Generally produced with physical skills• Examples….a car, a desk, an airplane
Service• Intangible• Generally produced with knowledge• Examples…Medical services, legal services, education
Trade-off vs. Opportunity CostTrade-off = All the choices given up
Opportunity Cost = Most valuable choice (trade-off) given up
Example….your time
EntrepreneurUses resources (factors of production) to
produce goods and services to satisfy needs and wants
EntrepreneurUses resources (factors of production) to
produce goods and services to satisfy needs and wants
Page 5 of your text book
Page 5Entrepreneur
Uses resources (factors of production) to produce goods and services to satisfy needs and wants
EntrepreneurUses resources (factors of production) to
produce goods and services to satisfy needs and wants
ExamplesLa Salle HSJack FMBank ATMAmazon.com
Quick Review…
1. What is the difference between a shortage and scarcity?(a) A shortage can be temporary or long-term, but scarcity always exists.(b) A shortage results from rising prices; a scarcity results from falling prices.(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.(d) There is no real difference between a shortage and a scarcity.
2. Which of the following is an example of using physical capital to save time and money?(a) hiring more workers to do a job(b) building extra space in a factory to simplify production(c) switching from oil to coal to make production cheaper(d) lowering workers’ wages to increase profits
Quick Review…
1. What is the difference between a shortage and scarcity?(a) A shortage can be temporary or long-term, but scarcity always exists.(b) A shortage results from rising prices; a scarcity results from falling prices.(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.(d) There is no real difference between a shortage and a scarcity.
2. Which of the following is an example of using physical capital to save time and money?(a) hiring more workers to do a job(b) building extra space in a factory to simplify production(c) switching from oil to coal to make production cheaper(d) lowering workers’ wages to increase profits
Homework• Questions 1 – 7
• PDF page 37
ArticleSearch Economic Terms
WorksheetChapter 1, Section 1
Student videos
http://www.youtube.com/watch?v=fdM8ssBvNxU
THREE MINUTE BREAK
http://www.online-stopwatch.com/full-screen-stopwatch/
Production Possibilities CurveGraph showing the trade-offs (i.e. possible
production outcomes)
Production Possibilities CurveGraph showing the trade-offs (i.e. possible production outcomes).
Trade offs is a key concept. More of one good or service, less of the other.
Product (good or service) B
Product (good or service) A
Production Possibilities CurveWhy is the production possibilities curve
“bowed out”?
Production Possibilities CurveWhy is the production possibilities curve
“bowed out”?
ANSWER: The Law of Increasing Opportunity Costs
Production Possibilities CurveWhy is the production possibilities curve
“bowed out”?
ANSWER: The Law of Increasing Opportunity Costs
As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.
Production Possibilities CurveWhy is the production possibilities curve
“bowed out”?
ANSWER: The Law of Increasing Opportunity Costs
As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.
WHY you might askBook Example
Watermelons (millions of tons)
Shoes(millions of pairs)
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Production Possibilities Graph
Watermelons (millions of tons)
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
A production possibilities graph shows the cost of producing more of one item. To produce four million more shoes (move from point c to point d) is a cost of 3 million pairs of shoes. The Trade Off (the real cost) of producing four million more shoes (to go from 14 to 18) is the three million tons of watermelons that you give up (going from 12 to 9)
Watermelons (millions of tons)
Shoes(millions of pairs)
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Production Possibilities Graph
Watermelons (millions of tons)
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the fifteenth million pair of shoes (one million pairs of shoes that happens to be the fifteenth million)?
Watermelons (millions of tons)
Shoes(millions of pairs)
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Production Possibilities Graph
Watermelons (millions of tons)
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the fifteenth million pair of shoes (one million pairs of shoes that happens to be the fifteenth million)?
ANSWER: Eight million tons of watermelons
Watermelons (millions of tons)
Shoes(millions of pairs)
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Production Possibilities Graph
Watermelons (millions of tons)
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the first million pair of shoes?
Watermelons (millions of tons)
Shoes(millions of pairs)
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Production Possibilities Graph
Watermelons (millions of tons)
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the first million pair of shoes?
ANSWER: 200,000 tons (1/5 of a million) of watermelons
Law of Increasing Costs…Revisited
The Law of Increasing Opportunity Costs - As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.
The cost of first million shoes cost 200,000 tons of watermelons
The cost of the fifteenth million (still one million shoes) cost five million tons.
THE COST INCREASED
Law of Increasing Costs…Continued
Why is that the case?
Law of Increasing Costs…Continued
Why is that the case?
Because the entrepreneur uses the best shoe making resources (factors of production) for making shoes first…the worst is used last.
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Watermelons (millions of tons)
Production Possibilities Graph
g (5,8)
A point of underutilization
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)b (8,14)
S
Efficiency means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating efficiently.
Sh
oe
s (
mil
lio
ns
of
pa
irs
)
25
20
15
10
5
0 252015105
Watermelons (millions of tons)
Production Possibilities Graph
T
Future productionPossibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)b (8,14)
S
Growth If more resources become available, or if technology improves, an economy can increase (more stuff) its level of output and grow. When this happens, the entire production possibilities curve “shifts to the right.”
Guns or ButterPhrase used by economists to describe trade-offs.
Military Goods (guns)
Consumer Goods
(Butter)
Worksheet, Production Possibilities Curve
HomeworkRead Chapter Two, Questions 1 – 6 (page 47)Review Powerpoint for next class (online)Read “Current Reading Assignment” (online)Reading Assignment for next class
The subject of the article is the importance of human capital
Questions to consider (i.e. be able to answer)
• Why is Taiwan doing well?• What factor of production is key to Taiwan’s success?• Which factor of production was important....
When Columbus sailed to the new world? During the period of colonization? During the industrial revolution?
• How does this effect you in 2013?
HANDOUTS