Needs vs Wants Need Basic requirement for survival

Needs vs. Wants • Need- Basic requirement for survival • Want- Means of expressing a need • Influenced by society • Influenced by culture • Change over time • Many only satisfy for short period of time • Depending on situation, can be labeled reasonable or unreasonable By examining this picture, what needs or wants do these people have? What would be unreasonable wants? http: //www. hra. org/~library/greatdepression. html

The Fundamental Problem in Economics is SCARCITY • Scarcity- Resources are always limited compared with the number and variety of wants people have • Scarcity is not caused by a shortage of money.

What is scarce in each of these scenarios? 1. Brownouts in Los Angeles? Electricity 2. People carpooling to work everyday? Gasoline 3. Turning off the faucet while you brush your teeth? Water 4. Mandatory newspaper recycling Trees

Scarcity is caused by a lack of productive resources or a lack in one of the four factors of production. The Four Factors of Production: Resources people have for producing goods and services to satisfy their wants 1. Land-Natural Resources used to make the final product 2. Capital-Machines, tools, money used to make the final product 3. Labor-Workers used to make the final product 4. Entrepreneur-Risk taker

Four Factors of Production Brainstorm: What does it take to produce a pair of blue jeans? Land Cotton Dyes Copper/metal Labor Sewers Capital Entrepreneur Sewing machine Levi Scissors Wrangler

Is water scarce today? Will water be scarce in the future? What are some factors that are leading to this scarcity? • Population Growth • Climate • Food Production • Land Use • Dams http: //school. discovery. com/lessonplans/activities/watereverywhere/module. html

• Production is followed by Distribution Want-Satisfaction Chain • Distribution- Process by which goods and services are made available to the people who want them • Distribution is followed by Consumption • Consumption- Act of buying or using goods or services http: //www. curriculumlink. org/econ/images/chain. 3. jpg

Place in order using the Want-Satisfaction Chain Place in order 1 -8 __ Computer __ George uses his computer __ George wants a computer game __ Computer shipped to store __ Programmer, silicon, factory __ George wants a computer __ George buys a computer __ Computer is assembled in factory

• Economy is all about making choices • You have to make choices because of scarcity • Which of your wants will you satisfy? • You must examine the trade-offs. An exchange of one thing in return for http: //www. ruralwellbeing. org. uk/images/choice. gif another, especially relinquishment of one benefit or advantage for another regarded as more desirable

For Example Concert Tickets New Computer IPOD Future Costs Very Little Yes Very Little Can Reuse No Yes Parents Approval Maybe Most Likely

• Opportunity Cost- Highest valued benefit given up when a choice is made • For example, if you chose the concert tickets the opportunity cost would be the 2 nd option that you would of chosen • Businesses must make similar decisions everyday • For Example: Should Ford Motor Co spend money on building a new car plant? http: //www. dailypress. com/extras/solutions/images/SOL 120602. gif

1. What tradeoffs did 2. you make?

• What tradeoffs did you make in order to balance the budget? • What is the opportunity cost of your budget recommendation? • Summarize the likely future consequences of your budget recommendation.

• There are 3 basic economic decisions: • Which goods and services should be produced and in what amounts? • How should these good and services be produced? • Who will get the goods and services that are produced? http: //cache. consumerist. com/assets/resources/2006/08/question_marks. jpg

• Questions 1: Which goods and services should be produced and in what amounts? • Factors which influence this decision • Factors of Production availability • Natural Resources • Capital • Labor • How much they (entrepreneurs) think they can sell http: //www. business 2000. ie/images/case_studies/enterprise_ireland/diagram 1. gif

• Question 2: How will land, labor, and capital be combined? • Primary goal: Least costly • Technology- Practical application of science to commerce or industry http: //online. wsj. com/public/resources/images/MK-AG 360_TWOPLA_20060523223742. jpg http: //www. autolife. umd. umich. edu/Design/Gartman/D_Casestudy/P 833_365_Machine. Shop 2. gif http: //imagecache 2. allposters. com/images/pic/FIP/MI-00394 -C~Assembly-Line-Ford-Factory-Michigan-Posters. jpg

• Question 3: Who will get the goods and services that are available? • Should they be divided equally? • Should citizens determine who gets what • How much government intervention is there to answer this question • How much economic freedom is there? • A lot of government intervention equals no economic freedom • People would receive the same even some may work harder • People have no say in the economy • No government intervention equal a lot of economic freedom • People compete freely and some may get more than others • People have all the say in the economy

• There are 4 different types of economies • Traditional Economy • Command Economy • Market Economy • Mixed Economy

Traditional Economy: • Basic economic decisions are made according to long established patterns of behavior that are unlikely to change • Customs and traditions are passed from elders to youth • Family is the basic unit, however all members work together to support society, not just family • Works better with a smaller society • Fewer resources are needed • Fewer goods and services needed to be produced • Very few left in today’s world • Central and South America, Asia, Africa

Traditional Economy: • Answering the basic questions: • What and How much to produce? • Answered by tradition and custom • Very little freedom • No Technology • Very little change over a period of time • Who gets what is produced? • May be based on role in society • May be divided according to number is family • Who owns resources? • Usually own their own land, tools and labor

Command Economy: • Government or a central authority owns or controls the factor of production and makes the basic economic decisions • Egyptians, Medieval lords, USSR, Cuba and North Korea • Answering the 3 basic questions: • What and how much is produced • Consumers have very little or no power in determining what or how much gets produced • Who gets what is produced • Depends on the goals and values of central government • Greedy Dictator-keeps more for himself OR • Satisfy the citizens, regardless how much they produce • Who owns resources? • Central authority

Market Economy: System in which private individuals own the factors of production and are free to make their own choices about production, distribution and consumption • Market Economy is also known as • Free Enterprise System- No government control • Capitalism- Capital is privately owned • Market- Place or situation in which buyers and sellers agree to exchange goods and services. This can be the local farmers market, Walmart or Ebay • No one person or group can run the market • Competition plays an important role in the market economy • Producers compete for the wants of people • Labor competes for jobs http: //www. favoritethingz. com/images/User. Images/90279 -ebay-logo. jpg

Market Economy: • Answering the 3 Basic Questions: • What and how much is produced? • Driven by two factors • Profit- Difference between the total cost of production and the total revenues from buyers • Invest- To use your money to help a business get started or grow, with hope that the business will earn a profit in which you can share • Who gets what is produced? • Those who earn high wages, own land or capital will get more • Who owns the resources? • Private people and companies http: //www. maced. org/images/dollar-sign. jpg

Modern day economy: • Mixed Economy- Mixture of the 3 other systems • Example: China • Predominately a command economy but have introduced more of a market economy as private industries are steadily growing and competing for the wants of the Chinese population. http: //www. jzphotos. com/images/china/nanjing 04/china_mcdonalds_s. jpg http: //www. cnn. com/SPECIALS/1999/china. 50/dispatches/09. 24. americanization/coke. jpg http: //www. neatorama. com/images/2006 -10/pepsi-china. jpg

United States Economy: • NOT a 100% pure market economy • Aspects on non-market economy • Minimum wage • US Government controls education, mail, military • Several regulations on businesses http: //www. zeenews. com/pics/BUS/nyse-013107. jpg http: //images. amazon. com/images/P/B 0002423 YK. 01. _SCLZZZZZZZ_V 1111746544_. jpg

Economic Spectrum- A way to compare economic systems, based upon government involvement in a country’s economy Command Mixed United States Canada Mexico China North Korea Market

http: //www. rainer-rilling. de/texte/Kartographien%20 der%20 Macht/Linked. Documents/economic%20 freedom%202006. jpg

Developing Economy. Any 3 rd world nation that does not have a self-sustaining economy or relies on outside assistance from other nations or organizations. A developing economy will improve their economy by: 1. Improving Infrastructure A. Transportation B. Communication 2. Improve Human Development A. Education B. Healthcare 3. Creating Jobs/Industries