Ya cant always get want ya want Mick

“Ya can’t always get want ya want…” Mick Jagger, The Rolling Stones, 1969 12. 1 Students understand common economic terms and concepts and economic reasoning. 12. 4 Students analyze the elements of the U. S. labor market in a global setting. 12. 5 Students analyze the aggregate economic behavior of the U. S. economy.

With Limited Resources, Scarcity is Everywhere • Goods seem to be everywhere! – Physical objects • Services seem to be everywhere! – Activities done for us by others • Shortages are temporary, scarcity is forever – Shortage: lack of something that is desired (occurs when less of a good or service available) • Fashion Fad, Wars, Disasters can disrupt production, Restaurant specials! • Finite…

Economic Decision Making • Our Wants Always Exceed Our Resources – Food, shelter, water – Our ability to satisfy our wants (and sometimes our needs) is limited • Time • Bill Gates

How Do We Satisfy Economic Wants? • Factors of Production – Inputs: scarce resources that go into the production process – Outputs: goods and services that are produced by using resources – Production Equation: • Land + Labor + Capital = Goods and Services • (entrepreneurship: willingness to take economic risks) - #4?

Land Resources: The “Gifts of Nature” • All of the natural resources – Perpetual resources • Solar, wind – Renewable resources • Forests, fresh water, fish – Nonrenewable resources • Fossil fuels

Labor: Putting Human Capital to Work • Produces goods and services for a wage • Human Capital: strip person of all but self and what skills are left? – “High Human Capital” = lots of skilled workers – “Low Human Capital” = unskilled workers CORRELATION BTW LEVEL OF HUMAN CAPITAL AND STANDARD OF LIVING (Japan vs Nigeria) “ 75% of a countries wealth lies with the education, training, and skills of its people” – Gary Becker

Capital Resources: Tools, Machines, and Buildings • Physical Capital or Capital Goods – Used in the production of goods and services – Difference btw “consumer good” vs. “capital good” – Physical capital can replace labor • (vacuum cleaner, ATM machines)

Entrepreneurship as a form of Human Capital • Combines land, labor, and capital in new ways to produce goods and services • Roles: – Innovator: new inventions/technologies – Strategist: vision and key decisions – Risk Taker: investment challenges/succeed or fail? – Sparkplug: turns ideas into reality • Nolan Bushnell (Atari/Chuck E. Cheese)

Working Smarter Boosts Productivity • Use inputs effectively, can increase productivity • Productivity ratio: productivity = output input *Lumber mill: output = total number of board feet, input = total hours of labor, productivity = board feet of lumber produced in an hour ***How could productivity be increased?

Maximizing Utility: What we want when we choose • Utility = satisfaction one gains from consuming a product or service or from taking an action – Improving our lives (vaccinations) • Tradeoffs: scarcity-forces-tradeoffs – Business as well as individuals – “guns vs butter” analogy • Opportunity cost: The best thing we give up to get what we want – Value of the next best alternative • IPhone vs Blackberry

Making “how much” decisions at the Margin • Marginal Utility = extra satisfaction from on addition of unit of a good or service – Marginal utility diminishes as you get more – Negative utility = going overboard • Consumption of ice cream? *law of diminishing marginal utility

How can we measure what we gain and lose when making choices? • Production Possibilities Frontier – Economic model using a line graph – Use of two (2) goods – Combination of production of both goods using available resources/technology most efficiently • Study hours for Math and/or History • Production Possibilities Curve or Frontier: available combinations with current resources

PPF Example

Measuring Opportunity Costs Using the PPF • Bananas vs cell phones? – Finite land for factories or plantations – Labor trained for bananas or cell phones – Analysis of the combinations… • Economic efficiency using the PPF – Using resources to produce maximum results – Each point on graph represents efficient use of resources – Snapshot of an economy’s production possibilities