Unit 1 Economics There Is No Such Thing

Unit 1 Economics: There Is No Such Thing As A Free Lunch TINSTAAFL

Learning Targets w I will define scarcity, allocate, and resource. w I will explain how scarcity applies to real life. w I will examine the ways resources can be allocated.

Definitions w Scarcity = Not enough of a resource to satisfy everyone’s wants at all times.

Definitions w Allocation = To distribute something w Resource = any useful thing, person, or idea that can be used

How can we allocate resources? w Randomly / Luck w Speed (first come, first served) w Age, gender, or physical ability w Wealth / social class w Connections / nepotism w Need

Who allocates resources in our country? w People w Businesses w The government

Closing: Exit Ticket 8/2/2012 1. List examples of resources. 2. Explain what scarcity means. 3. List ways we can allocate resources in any economy.

Economics is: w The study of how people respond to scarcity. w Scarcity = unlimited wants + limited resources

Scarcity is more than “not enough”. EVERY resource desired is scarce because it can be used another way. Ask yourself to know if something is scarce: a. Is it a resource? b. Do people pay for it? c. Can it be used another way?

Are these resources scarce? w Fresh water w Wool w Petroleum (oil) w Workers w Leather w Plastic w Diamonds w Wood

But THESE are NOT Scarce w Salt water w Oxygen (typically) w Sunshine w Hepatitis w Trash Money is NOT a resource!

The 7 basic ideas you should know to think like an economist 1. People make decisions, and they choose for good reasons. 2. Everything has a cost. Time is a cost to most decisions.

3. Incentives matter. You can predict people’s decisions based on their incentives. 4. People create rules and systems to control other people’s decisions.

5. People gain from voluntary trade. 6. People set the cost of goods and services through their choices. 7. Every action has a result.

Principles (reminder): 1. People have reasons for choices. 2. Everything costs something. 3. Incentives predict actions. 4. Societies have rules. 5. Trade is win-win. 6. People affect prices. 7. Actions have consequences.

Opening 8/6/2012: w What are the 3 things that must be true for a resource to be scarce – the 3 questions to ask? w Is paper scarce? Why or why not? w Is chocolate scarce? Why or why not? w Is garbage scarce? Why or why not?

Learning Targets: w I will be able to define opportunity cost and tradeoff. w I will be able to evaluate different options for decisions.

Trade-offs w Every choice has a cost, or trade-offs. w Trade-offs: everything given up when a choice is made. w Examples: w Choose water and give up Powerade and Coke. w Choose to be a doctor and give up being a lawyer and a sports analyst.

Opportunity Cost: There’s Only One! w The 1 BEST trade-off= opportunity cost. w Opportunity cost is your second choice. w Which of the 7 economic ways of thinking is this? ? ?

Example: w Chris decides to go to college for 4 years on a partial scholarship. w What are his trade-offs? w Work experience for 4 years w Lost income for 4 years w Tuition cost for 4 years w Studying instead of partying w Give up car to live on campus w Give up great girlfriend b/c he moved away w Chris’s opportunity cost: w (personal to him) w Only ONE of these

w Maggie has overbooked her Saturday. She is supposed to: w Go to a wedding w Meet her boyfriend’s parents w Go on a job interview w Clean her apartment w Babysit her sister’s kids w Renew her driver’s license at the DMV w She decided to babysit. w How many trade-offs are listed? w How many opportunity costs are listed?

Practice: w I am trying to decide what to spend my last $100 of my paycheck. w Options: w Pay down credit card debt w Go out partying w Buy new clothes w Save it for an emergency w Buy my mom a really nice bday present w I decided to go out partying. What are my trade-offs? What is my opportunity cost?

Work: w We are going to do two of your first homework terms together right now. w It is always vocab terms. w Homework is due every Friday. w You must hand-write your answers.

Homework Term #1: Scarcity. w Definition: anything desirable and limited. Almost everything is limited because there always other uses for resources. AND w Example: Oprah even deals with scarcity because she has limited time. OR w Pictogram: see board. OR w Circle or Bubble Map

Homework Term #2: Allocate w Definition: To give or pass something out. w Example: My boss allocated the bathroom cleaning duty to me. OR w Pictogram: see board. OR w Circle or Bubble Map

Learning Targets w I will use cost-benefit analysis to evaluate decision. w I will define economic utility & rational decision-making.

How do know if a decision is right for you? w Cost-benefit analysis is a way of making a decision. w Some things about the future are unknowable (the unintended consequences). w BUT, with the information known, make the best decision!

w Costs of actions = trade-offs w Cost of buying Chick-fil-a this am: w $3 I spent w 150 extra calories I ate w 10 minutes out of way to work w No room in belly for banana muffin I baked w Guilt over eating chicken (since I’m a vegetarian)

w Benefits of action = good effects w Benefits of buying Chick-fil-a this am: w 10 grams extra protein w Happiness of yummy food w Happiness & usefulness of something = economic utility w The Chick-fil-a biscuit increased my economic utility, or made me happier. w Helped local economy through purchase

Charting Cost-Benefit Analysis Benefits of Graduating High School Costs of Graduating High School Pride Missed income from working while in school Better job than no diploma Dealing with rules

Cost-benefit analysis = a better decision. w Rational decisions are when you systematically think of costs and benefits. w Only take the action if the benefits outweigh the costs. w Rational decisions happen when you use cost-benefit analysis.

Benefits of robbing bank Costs of robbing bank Lots of money in short time Have to protect money – can’t put in bank Risk of being caught is high – then jail and maybe prison Rational Decision: I’m NOT going to rob a bank.

Learning Targets: w Define and give examples of Factors of Production. w Explain how Division of Labor affects work pace.

Factors of Production = Productive Resources. w FOP = every kind of resource in the world w 4 categories of FOPs: w Land w Labor w Capital w Entrepreneurs

Land = gifts of nature w Natural resources given by the earth. w Animals are also land. w Examples: Dirt, wood, water, oil, horses

Labor = workers w Any person paid to do a job is a laborer. w Laborers are often told what to do by entrepreneurs. w Examples: teachers, bankers, pro athletes, President Obama

Capital = tools & machines w Capital is man-made and helps get jobs done. w Capital can be simple (pencils) or complex (airplanes). w Examples: desks, computers, cars, glasses, hammers

Entrepreneurs = business owners w The brains of a business w The risk-takers w The boss of laborers w Examples: Bill Gates, Tyler Perry, Oprah, Steve Jobs, Beyonce, Justin Bieber

All FOPs are needed for every business. w All goods and services sold require at least 1 of each FOP. w Example: Babysitting business w Entrepreneur: founder w Land: home to watch kids w Labor: babysitter w Capital: crayons

Practice: w Create your own example – use 1 of each FOP for a construction company.

Division of Labor w Splitting up work between people to get it done faster w Like an assembly line w Each person does the same task repeatedly & gets faster w No transition times to move around – stay in same place

Practice: w Explain how division of labor makes a football team or a school better.

FOP collage assignment w You will fill the outline of a person with pictures from magazines. The pictures should be glued in the general shape of a human body. The pictures should cover the outline of the person collage-style. Follow the order below.

Head: The brains of all Factors of Production are the entrepreneurs. Make sure your entrepreneur(s) owns a business and is not just a worker. Label on the side what business each entrepreneur owns and who she/he is. Glue a picture of an entrepreneur as the head. Arms: Your arms and hands vary from technical to physical work and so can your representative laborers. As long as people are working, they count as laborers. Glue pictures of laborers for the arms.

Torso: Your torso contains all your essential organs beyond the brain, and so too are land resources essential to the function of all other productive resources. Remember that natural resources include animals. Glue pictures of land resources for the torso. Legs: Your legs and feet are what make you mobile just like capital resources move your work along. Any tools, machines, and man-made objects count as capital. Glue pictures of capital for the legs.

w Written individual assignment: w w In a short paragraph, describe a business (real or imaginary) that could use one picture from each category on your collage. w For example: (If there was a picture of a tree for a land resource on my collage) w My entrepreneur is ______ and s/he started a ____ business. S/he could use trees for wood to make an office.

Debrief: w What helped some groups work faster than others? w What Fo. Ps did you use to complete this assignment? w What are some of the problems of division of labor? w How do businesses solve problems of division of labor?

Finish Work from Tuesday: w Select one of the articles: “Boy Scouts Decision”, “Drug Laws”, or “Organ Donation”. w Summarize in 1 -3 sentences what the central decision is in the article. w Create a cost-benefit chart for what YOU would do in that situation. Think of at least 3 costs and 3 benefits. w State in 1 -3 sentences what decision you reached.