Scarcity and Economic Reasoning Indiana Standard 1 Scarcity

Scarcity and Economic Reasoning Indiana Standard #1

Scarcity and the Science of Economics-1. 1 The Fundamental Economic Problem is: • Scarcity • Economics • Needs • Wants

Goods, Services, and Consumers • A. Goods 1. 2. 3. 4. • B. Services • C. Consumers What is this video saying about distribution of wealth?

Value, Utility, and Wealth • A. Value • B. Utility • C. Wealth • D. (TINSTAAFL)

Three Basic Questions • A. • B. • C. Answer these 3 questions concerning the following country:

Country A Area: 8, 260 square miles north-south 88 miles east-west 163 miles most of land has very fertile soil Population: 6. 1 million majority of persons are rural Chief Products: coffee, sugar, cotton, basic grains, livestock, fisheries and forestry Literacy Rate: 84. 5% Distribution of Income or Consumption by Percentage: Lowest 10% 1. 2% of wealth Highest 10% 40. 5% of wealth What? How? and For Whom? (What country is this? )

The Scope of Economics • Analysis • Explanation • Prediction

Our Economic Choices-1. 2 • Factors of production are resources necessary to produce what people want or need. • Land • Capital • Labor • Entrepreneurs

Trade-off Opportunity Costs

Now solve the following problem: “Jarod has two choices for a summer job. The 1 st opportunity is at a computer manufacturer where he would earn $10. 25 an hour. The 2 nd opportunity is with a landscaping company where he could work AND have lunch with his 3 closest friends every day. The landscaping job pays $8. 65 an hour. For one 40 hour workweek what would be the opportunity cost, in dollars, of accepting the landscaping job? What would the opportunity cost, not in dollars, of accepting the computer manufacturing job?

Production Possibilities Frontier (PPC) diagram representing the maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed • A= • B= • C= • D= • E=

• In the long run, (i. e. future economic growth) what are some ways this country could reach that goal? • • • 1) 2) 3) 4) 5)

• 1) If Vanbytheriverville currently produces 100 guns and 400 butter, what is the trade-off for an additional 100 guns? • 2) If Vanbytheriverville currently produces 300 guns and 300 butter, what is the trade-off for an additional 100 guns? • 3) Would the production of 200 guns and 200 butter be efficient? • 4) Using your answer for #3, how many additional guns could Vanbytheriverville produce without giving up any butter? Why or Why not?

Using Economic Models-1. 3 Describing Economic Growth Adam Smith (see p. 9) “The Invisible Hand” • A. • B. • C. • D.

The Circular Flow of Economic Activity • Markets in the Macroeconomic Model • There are two types of Markets: • 1. • 2. • There are two types of Flows: 1. 2.

*What strategies do Economists use to study Scarcity? 1) 2) 3) *What does the study of economics do for us? 1) 2) 3) 4)