Monday August 21 Happy Monday Please get out

Monday, August 21 Happy Monday Please get out your notes and something to write with. HW: 1. Review Chapter 1 and your notes – quiz tomorrow! 2. On your own, read and take notes from the “Economic System” PPT posted online. This won’t be covered on the quiz but will be covered on your unit test. 1

Unit 1: Basic Economic Concepts 2 Copyright ACDC Leadership 2015

TINSTAAFL Define Free… There Is No Such Thing As A Free Lunch- economic concept that states that nothing is truly without a cost A government cannot spend money and provide goods and services at no ones expense. https: //www. youtube. com/watch? v=ie 1 XGTYue. Hw

The 4 Factors of Production 5 Copyright ACDC Leadership 2015

Three Basic Questions Every society must decide: What to produce? How to produce? For whom to produce? Depending on which system a nation utilizes, these questions may be answered by the government or by individuals.

Goods and Services. 4 Categories: 1. Consumption – HDTV, movies, Coke, haircuts 2. Capital – farm tractor, factory 3. Government – weapons systems, police and fire, public schools 4. Exports – produced in one country, sold in another.

The Four Factors of Production (“How) ALL resources can be classified as one of the following four factors of production: 1. Land -All natural resources that are used to produce goods and services. (Ex: water, sun, plants, animals) 2. Labor -Any effort a person devotes to a task for which that person is paid. (Ex: manual laborers, lawyers, doctors, teachers, waiters, etc. ) 3. Capital - Physical Capital- Any human-made resource that is used to create other goods and services ( Ex: tools, tractors, machinery, buildings, factories, etc. ) Human Capital- Any skills or knowledge 8 gained by a worker through education and experience Copyright ACDC Leadership 2015

The Four Factors of Production 4. Entrepreneurship ambitious leaders that combine the other factors of production to create goods and services. Examples-Henry Ford, Bill Gates, Inventors, Store Owners, etc. Entrepreneurs: 1. Take The Initiative 2. Innovate 3. Act as the Risk Bearers PROFIT So they can obtain _____. Copyright ACDC Leadership 2015 Profit = Revenue - Costs 9

REVIEW 1. 2. 3. 4. 5. Explain relationship between scarcity and choices Differentiate between positive & normative Differentiate between price and cost. Differentiate between consumer and capital goods Give examples of each of the 4 Factors of Production 6. Define human capital 7. Define tradeoffs 8. Define opportunity cost 9. What is TINSTAAFL 10. Name 10 different teachers at CHS. 10 Copyright ACDC Leadership 2015

WE HAVE A PROBLEM!! The Economizing Problem… Scarcity Society has unlimited wants but limited resources 11 Copyright ACDC Leadership 2015

The Production Possibilities Curve (PPC) Using Economic Models… Step 1: Explain concept in words Step 2: Use numbers as examples Step 3: Generate graphs from numbers Step 4: Make generalizations using graph Copyright ACDC Leadership 2015

What is the Production Possibilities Curve? • A production possibilities curve (or frontier) is a model that shows alternative ways that an economy can use its scarce resources • This model graphically demonstrates scarcity, trade-offs, opportunity costs, and efficiency. • • 4 Key Assumptions Only two goods can be produced Full employment of resources Fixed Resources (Ceteris Paribus) Fixed Technology Copyright ACDC Leadership 2015 13

Production “Possibilities” Table Bikes Computers A 14 0 B 12 2 C 9 4 D 5 6 E 0 8 F 0 10 Each point represents a specific combination of goods that can be produced given full employment of resources. NOW GRAPH IT: Put bikes on y-axis and computers on x-axis 14 Copyright ACDC Leadership 2015

Production Possibilities How does the PPG graphically demonstrates scarcity, trade-offs, opportunity costs, and efficiency? Impossible/Unattainable 14 (given current resources) A B Bikes 12 G C 10 8 Efficient D 6 Inefficient/ Unemployment 4 2 E 0 0 Copyright ACDC Leadership 2015 2 4 6 8 10 Computers 15

Opportunity Cost Example: 1. The opportunity cost of moving from a to b is… 2 Bikes 2. The opportunity cost of moving from b to d is… 7 Bikes 3. The opportunity cost of moving from d to b is… 4 Computer 4. The opportunity cost of moving from f to c is… 0 Computers 5. What can you say about point G? Unattainable 16 Copyright ACDC Leadership 2015

The Production Possibilities Curve (or Frontier) 17 Copyright ACDC Leadership 2015

Production Possibilities A B C D E CALZONES PIZZA 4 3 2 1 0 0 1 2 3 4 • List the Opportunity Cost of moving from a-b, b-c, c-d, and d-e. • Constant Opportunity Cost- Resources are easily adaptable for producing either good. • Result is a straight line PPC (not common) 18 Copyright ACDC Leadership 2015

Production Possibilities A B C PIZZA ROBOTS D E 20 19 16 10 0 0 1 2 3 4 • List the Opportunity Cost of moving from a-b, b-c, c-d, and d-e. • Law of Increasing Opportunity Cost • As you produce more of any good, the opportunity cost (forgone production of another good) will increase. • Why? Resources are NOT easily adaptable to producing both goods. • Result is a bowed out (Concave) PPC Copyright ACDC Leadership 2015

Constant vs. Increasing Opportunity Cost Identify which product would have a straight line PPC and which would be bowed out? Corn Copyright ACDC Leadership 2015 Cactus Wheat Pineapples

Econmovies Episode 3: Monsters Inc. 21

The Production Possibilities Curve and Efficiency 22 Copyright ACDC Leadership 2015

Two Types of Efficiency Productive Efficiency • Products are being produced in the least costly way. • This is any point ON the Production Possibilities Curve Allocative Efficiency • The products being produced are the ones most desired by society. • This optimal point on the PPC depends on the desires of society. Copyright ACDC Leadership 2015 23

Productive and Allocative Efficiency Which points are productively efficient? Which are allocatively efficient? 14 A B Bikes 12 G Productively Efficient combinations are A through D Allocative Efficient combinations depend on the wants of society 10 8 C E 6 4 (What if this represents a country with no electricity? ) F 2 D 0 0 Copyright ACDC Leadership 2015 2 4 6 8 10 Computers 24

Why two types of efficiency? Is combination “A” efficient? Yes and No. It is productively efficient but it is not the combination society wants Size 20 running shoes A Copyright ACDC Leadership 2015 Size 10 running shoes

2008 Audit Exam

2008 Audit Exam

Shifting the Production Possibilities Curve 28 Copyright ACDC Leadership 2015

Production Possibilities 4 Key Assumptions Revisited • Only two goods can be produced • Full employment of resources • Fixed Resources (4 Factors) • Fixed Technology What if there is a change? 3 Shifters of the PPC 1. Change in resource quantity or quality 2. Change in Technology 29 3. Change in Trade Copyright ACDC Leadership 2015

Computers Production Possibilities What happens if there is an increase in population? Pizzas Copyright ACDC Leadership 2015 30

Computers Production Possibilities What happens if there is an increase in population? Pizzas Copyright ACDC Leadership 2015 31

Computers Production Possibilities What if there is a technology improvement in pizza ovens Pizzas Copyright ACDC Leadership 2015 32

Computers Production Possibilities What if there is a technology improvement in pizza ovens Pizzas Copyright ACDC Leadership 2015 33

Capital Goods and Future Growth Countries that produce more capital goods will have more growth in the future. Panama – Favors Consumer Goods Mexico – Favors Capital Goods Future PPC Consumer goods Panama Copyright ACDC Leadership 2015 Future PPC Capital Goods Current PPC Consumer goods Mexico 34

PPC Practice Draw a PPC showing changes for each of the following: Pizza and Computers (3) 1. New computer making technology 2. Decrease in the demand for pizza 3. Mad cow disease kills 85% of cows Consumer goods and Capital Goods (4) 4. Destruction of power plants leads to severe electricity shortage 5. Faster computer hardware 6. Many workers unemployed 35 7. Significant increases in education Copyright ACDC Leadership 2015

Question #1 New computer making technology Computers A shift only for computers Copyright ACDC Leadership 2015 Pizzas 36

Question #2 Computers Decrease in the demand for pizza Copyright ACDC Leadership 2015 The curve doesn’t shift! A change in demand doesn’t shift the curve Pizzas 37

Computers Question #3 Mad cow disease kills 85% of cows Copyright ACDC Leadership 2015 A shift inward only for Pizzas 38

Capital Goods (Guns) Question #4 Destruction of power plants Copyright ACDC Leadership 2015 Decrease in resources decrease production possibilities for both Consumer Goods (Butter) 39

Capital Goods (Guns) Question #5 Faster computer hardware Copyright ACDC Leadership 2015 Quality of a resource improves shifting the curve outward Consumer Goods (Butter) 40

Capital Goods (Guns) Question #6 Many workers unemployed Copyright ACDC Leadership 2015 The curve doesn’t shift! Unemployment is just a point inside the curve Consumer Goods (Butter) 41

Capital Goods (Guns) Question #7 Significant increases in education Copyright ACDC Leadership 2015 The quality of labor is improved. Curve shifts outward. Consumer Goods (Butter) 42

Capital Goods Extra graph to manipulate or add to powerpoint or questions X Y Z PPC 1 PPC 2 PPC 3 Consumer Goods Copyright ACDC Leadership 2015