Transcript
Goal 7
Introduction to Economics
What is Economics?
• Economics: the study of how people seek to satisfy their needs and wants by making choices
THE FACTORS OFPRODUCTION
GOAL 7: Economics
There are 4 Factors of Production:
• Land or Natural Resources
• Capital
• Labor
• Entrepreneurship
Land or Natural Resources
• Materials that are NATURALLY MADE and transformed into something else
• Examples:• Oil• Timber• Land• Crops• Natural gas• Milk
2 Types of Natural Resources• RENEWABLE– Can be replaced
or renewed or recycled
– ex: wood, water, crops
• NON-RENEWABLE– Once used,
resource is gone– Ex: Oil, Natural
Gas, Gold
LABOR
• PEOPLE who work to produce a good or service
• Example:– Construction worker– Teacher– Line cook
CAPITAL
• MAN MADE instruments that assist in making something else
• Examples:– Hammer– Robot– Book– Computer
Human Capital• Investment
in education or training for a laborer for more productive laborers
Entrepreneurs• People who RISK
time and money ($) to start their own business
• Examples:– Oprah– Ben & Jerry’s– Little girl selling
Lemonade– Donald Trump
Needs v. Wants
• Need: something people need that is necessary for survival (ex: air, food, shelter)
• Want: an item we desire but that is not essential to survival
Three Basic Economic Questions
What good and services should be produced?– Should money go to schools or a new city park??
• How should these goods and services be produced?– How much of the product are we going to produce?
• For whom should these goods and services be produced?– After goods and services have been produced, society must
determine how goods and services should be distributed among members of society…use a price system in the US
Every CHOICE you make has a…
• Monetary cost: price you paid for a decision ($)
• Trade off: ALL of the alternative choices
• Opportunity cost: the best alternative, your second choice
Scenario #1
• Dondrick studied for his exam instead of watching American Idol or doing his laundry.
Trade-offs:•American Idol,
laundry
Monetary cost:•none
Opportunity cost:•American Idol
Scenario #2
• Iesha has decided to go to college instead of getting a full-time job or joining the Navy.
Trade-offs Job, Navy
Monetary costs:
Money paid for college
Opportunity cost: job
• B’day gift, jacket
Trade-offs:
• Price of the Jordans
Monetary cost: • B’day gift for mom
Opportunity cost:
Scenario #3
• Michael bought a pair of Air Jordans instead of buying his mom a birthday gift or a new jacket for himself.
Productivity
How does an assembly line increase a company’s profits?
• Divides up the tasks to make a product and allows a worker to specialize in a task to make it faster• More product = more profit
Division of Labor
•Dividing up the tasks required to make a product.
Specialization
• Giving a worker a specific task to complete• Worker becomes a professional in the task
Automation
• creating a product with the assistance of machinery
Types of Workers
• Blue Collar:– wage-earning workers who wear work clothes ex:
mechanics, miners, maids • White Collar:
– office and professional workers who do not wear a uniform. Ex: lawyer, teacher, doctor
Types of Workers
• Skilled workers:– Workers who get special training to do their job,
earn more for their education– Ex: mechanic, teacher, doctor
• Unskilled workers:– workers do not have any special training that
allows them to earn more than a basic wage – Ex: fast food employee, cashier
What will happen to a company if they add too many factors of production?
• Law of diminishing returns– At a certain point adding another factor of
production will make a company less productive (lose $)
• Graph– What do you think this would look like?
Law of Diminishing Returns
• The tendency for a continuing effort toward a particular goal to decline in effectiveness after a certain amount of success has been achieved.
Supply and Demand
How can comparative advantage influence what a company or country produces?
• Comparative advantage: a country, individual, or company can produce a product at a lower cost than a competitor
• Produce products for less money to make a greater profit
TYPES OF ECONOMIES
3 Basic Economic Questions
• What to produce?• How to produce?• For whom to produce?
• What is produced?– Traditional items are
produced according to custom
• How is it produced?– According to custom,
no specialization or division of labor
• For whom is it produced?– For the local people
Traditional Economy
Command / Planned Economy
• What is produced?– Gov’t decides what they
believe to be best for the whole country.
• How is it produced?– Gov’t owns companies,
dictate how to make things. Use specialization and division of labor
• For whom is it produced?– Produce only what is needed
for the country
Market Economy• What is produced?– Whatever sellers want to
produce. Supply and demand are the main factors in decision making
• How is it produced?– Competition exists.
Business is run for profit. Specialization, division of labor used.
• For whom is it produced?– Produce for whoever will
buy in your country and throughout the world
Mixed Economy
• Most countries have mixed economies. They combine aspects of the 3 economies to make what is best for them.
• Ex: United States– mostly market (individuals buy and sell)– Some command (gov’t rules and restrictions)
– Little traditional (Native American, Amish communities)
top related