Economics 101 Strand 5: Concept 1: PO 1-4 Mr. Mosqueda
Dec 29, 2015
Economics 101
Strand 5: Concept 1: PO 1-4
Mr. Mosqueda
Wants & Choices
Economics is the study of CHOICES (as they pertain to PRODUCERS, CONSUMERS and the GOVERNMENT)
Everybody wants different things Clothing, food, shelter, etc Wants change over time
(toys, etc) Depends on society, cultures,
climate, interests, etc… Wants can be long or short term
VIDEO CLIPWilly Wonka: I Want It Now!
Productive Resources
The price/cost of the items we want depend on three factors: Factors of productionproduction
LAND (Resources from the Earth, unaltered by man)
LABOR (People’s effort, skills and knowledge)
CAPITAL (Man-made resources used over and over– eg., computers, machines, etc.
Production to Consumption
The GOODS and SERVICES produced are then sent to the consumers to be:
BARTERED without without moneymoney
PURCHASED with money with money (savings)(savings)
(This is called consumption)
The Consumption Problem
Productive resources (land, labor and capital) and goods and services are limited
Human wants and needs are unlimited
Resulting in SCARCITY
Making Choices
There are never enough resources to produce all the goods and services people want (SCARCITYSCARCITY)
As a result, people must make CHOICESCHOICES about what want they want to satisfy
Making Choices
Because things are scarce, buyers (consumers) and sellers (producers) have to make ECONOMIC CHOICES (resulting in OPPORTUNITY COSTS) CostsCosts (what you have to give up in order to get what you
want, eg. Money, time, etc.) OPPORTUNITY COSTOPPORTUNITY COST: the highest valued benefit
given up when a choice is made If the opportunity cost is worth it, then you should consume it!
What does it mean to study Economics?
Based on consumer choice and opportunity costs, economists must answer three basic questions: WHAT goods and services will be produced? HOW will the goods and services be
produced TO WHOM will the goods and services be
distributed?
The Study of Economics
By answering these questions most efficiently creates the need for SPECIALIZATION and INTERDEPEDENCE resulting in trade
Economics: DECSISION-MAKING under SCARCITY
Independent Practice
Answer Questions 2-6 on page 357, use Chapter 13, Section 1 (PP 349-357) for help if needed.
What you don’t finish in class, will be HOMEWORK!
Types of Economies
People do not make economic decisions all by themselves Communities working
together to produce, distribute and consume products is called an ECONOMYECONOMY
There are 3 types of economies Traditional, Market and
Demand
Traditional Economies
Traditional economies rely on people working together to help the whole community EX: Ancient tribes of
hunters, families, etc. All men hunting to “produce”
enough food for the entire tribe, all resources are shared by the entire community
Pure traditional economies are rare today
Command Economies
Government owns and controls the factors of production and makes economic decisions for the entire community Government decides
what people “need” or “want” and distributes it to the people
Socialism (USSR), North Korea, China, Kings
Market Economy Opposite of a Command Economy
Private individuals produce factors of production and are free to make their own choices about production, distribution and consumption
Relies on competition to produce high quality at low prices (Walmart, Target, etc)
People are free to do as they wish in order to make money
Very little government control Also known as Free Enterprise or
Capitalism Entrepreneurs create and run
companies and small businesses USA
Market Economy
BenefitsBenefits
1. Makes people rich
2. Competition produces high quality at low costs
3. Encourages creativity
4. More choices for consumers
5. Encourages hard work
DisadvantagesDisadvantages
1. People can take advantage of system
2. Greedy3. Can easily get out of
control4. Rich get richer, poor get
poorer5. Government may have a
difficult time intervening if necessary
Market Economy
Adam Smith Father of Capitalism Book: The Wealth of
Nations Absentminded
Frequently walked into things
Horrible cook Sleepwalker/Daydreamer Had prolonged
conversations with himself
Independent Practice
Answer Questions 2-5 on page 369, use Chapter 13, Section 2 (PP 363-369) for help if needed.
What you don’t finish in class, will be HOMEWORK!