Can We Have It All? Microeconomics Unit 1: Basic Economic Concepts Bell Ringer Describe a time you had to make a difficult decision between two or more options. Explain the situation, the next best alternative, and how you made your decision. An Economic Way of Thinking Economics wouldnt exist were it not for scarcity We have wants unlimited And live in a world with resources Limited Scarcity is the condition in which our wants are greater than the resources available to satisfy those wants ECONOMICS! Studies the choices people make while trying to satisfy their unlimited wants in a world of limited resources How do we get the things we want?! We produce them! Using the FOUR FACTORS OF PRODUCTION!!! What do we need to begin production? Michael Scott explains: The Four Factors of Production: Land all natural resources used to produce goods and services Labor the effort that a person devotes to a task for which that person is paid Capital any human-made resource that is used to produce other goods and services Entrepreneur ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services Wants are unlimited Resources are limited Therefore, People must make choices Consequences of Scarcity: Opportunity cost: Most valued alternative you give up to do something else. Trade-off: Get more of one thing only by getting less of another. Bell Ringer! Lets review the four fabulous factors of production: List, describe and give an example of each factor. LAND! Raw materials/natural resources used for production of good or service (EX: timber, land, fisheries, farms, oil, etc.) LABOR! Human capital available to transform raw materials into a good or service (EX: factory workers, servers, engineers, etc.) CAPITAL! Manmade resources used to produce goods and services (buildings, machinery, tools, etc.) ENTREPRENUERSHIP! Person with a visioncombines other factors of production to make a profit (Bill Gates, Howard Schultz, MR. TOD!) Wants are unlimited Resources are limited Therefore, People must make choices REMEMBER SCARCITY?! Consequences of Scarcity: Rationing Device: Way to divide who gets what portion of available goods and services. Price: Most widely-used rationing device Competition: People try to get more of a rationing device (i.e. cash monaaaay!) in order to get more of what they want. For us, that means competing for dollars. Voluntary Exchange Cornerstone of free enterprise (capitalism) People have the right to make exchanges or trades that are in their own best interests Examples?! Production Possibilities Curve Shows all possible combinations of two goods an economy can produce in a certain period of time. Because of scarcity, choices must be made about how much of which goods to produce. https://www.youtube.com/wat ch?v=83m0_pCky50 https://www.youtube.com/wat ch?v=83m0_pCky50