It’s all about resources and wants! Scarcity. The Problem Limited Resources Insufficient to...
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It’s all about resources and wants!
Scarcity
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The Problem
Limited Resources Insufficient to Fulfill our
Wants
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The Goal
Increase Individual and Societal Welfare
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Welfare
Subjective Evaluation of Individual and Societal Well Being
“How YOU doin’?”
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09/29/09 Lesson 1: Scarcity 5
Individual Goals: What We Want
• Health• Friends and Family• Career• Peace• Love• Stuff
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09/29/09 Lesson 1: Scarcity 6
Social Goals: What We Want
1. More and better education2. A cleaner environment3. More and better health care4. Greater public safety5. Less stress 6. Preservation of non-renewable
resources including natural resources 7. Elimination of poverty
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The Question
Given limited resources, how do we best use them to maximize people’s welfare?
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09/29/09 Lesson 1: Scarcity 8
RESOURCES: HUMAN CAPITAL
Knowledge and skills of the workforceKnowledge and skills of the workforce
Your job in school is to develop your human capital. Your job in school is to develop your human capital.
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09/29/09 Lesson 1: Scarcity 9
RESOURCES : PHYSICAL CAPITAL
Goods produced for the purpose Goods produced for the purpose
of producing something elseof producing something else
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09/29/09 Lesson 1: Scarcity 10
Natural Resources
“Gifts of Nature”
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09/29/09 Lesson 1: Scarcity 11
EntrepreneurshipCombines other resources, takes a risk, seeks a profit
Famous Amos
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09/29/09 Lesson 1: Scarcity 12
Money is not a resource
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09/29/09 Lesson 1: Scarcity 13
Time is not a resource
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09/29/09 Lesson 1: Scarcity 14
Resources• Human Capital• Entrepreneurship• Physical Capital • Land – Natural Resource
• Not Money• Not Time
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A nation’s wealth is determined by the
quantity and quality of its physical and human resources and the political and social
infrastructure.
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09/29/09 Lesson 1: Scarcity 16
SCARCITYYOU CAN’T HAVE EVERYTHING YOU WANT!
The inability of The inability of limited limited resourcesresources to satisfy people’s to satisfy people’s wantswants
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Scarcity
It’s about RESOURCES and WANTS.
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09/29/09 Lesson 1: Scarcity 18
Which people face scarcity?
a. Poor b.Rich c. Selfish d.Selfless
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09/29/09 Lesson 1: Scarcity 19
Scarcity is pervasive• Rich Athlete• Donald Trump• Joe Schmoe• Dr. Charkins• The President• Your parents
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You can’t eliminate scarcity
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But you can learn to deal with it!
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09/29/09 Lesson 1: Scarcity 22
The test of scarcity• It has to be allocated.• It has a positive price. • It has an alternative use.• People who want it have to give
something up to obtain it.• A choice has to be made
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09/29/09 Lesson 1: Scarcity 23
Some things that are scarce
• Pencils• Yachts• Steaks• Movies• Economists• Dentists• Refuse collectors
• Paper clips• Automobiles• Teachers• Shoes• Compact Disks• Computers• Computer
programmers
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09/29/09 Lesson 1: Scarcity 24
Some things that are not scarce
• Air
• Snow in some parts of the country
• Garbage
• Pollution
• Dirt
• Used gum• Pine cones in
Wrightwood• Sand at the beach• Cowrie shells in
Mombassa• Drunk drivers
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09/29/09 Lesson 1: Scarcity 25
Scarcity is the Villain!!!!!!
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09/29/09 Lesson 1: Scarcity 26
Why do .......• some very good
students get mediocre grades?
• hospitals turn pregnant women away?
• servers give less than perfect service?
• colleges turn students away?
• colleges have large classes?
• colleges offer so few courses?
• some parents spend little time with their children?
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09/29/09 Lesson 1: Scarcity 27
Why don’t.......• we provide organ
transplants for all who want them?
• we prevent death from dirty air?
• we educate all young children in their native language?
• you study 24 hours a day?
• you spend 24 hours a day with your loved one(s)?
• you sleep more?
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09/29/09 Lesson 1: Scarcity 28
Who is the villain when:• You don’t get the service you want at
a restaurant?• You don’t get the service you want
from the registrar?• You are put on hold by the
secretary?• You don’t get tickets to the concert?
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09/29/09 Lesson 1: Scarcity 29
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09/29/09 Lesson 1: Scarcity 30
Your reaction to scarcity• Yell, scream, whine, moan, whimper
• Accept scarcity and see if there is anything you can do to remedy or improve the situation
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scarcity is the villain, not the decision-maker.
When choices have to be made,
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09/29/09 Lesson 1: Scarcity 32
Attempts to avoid or ignore scarcity don’t
work.• I’ll put it on the credit card.• I’ll get up early to study.• Let’s get an apartment.• I need a new car; I can get a loan.• Let’s go to Vegas.
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Scarcity: The Problem Restated
The inability of limited resources to fulfill society’s wants.
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09/29/09 Lesson 1: Scarcity 34
Scarcity is not:• Poverty
– all poor face scarcity– all who face scarcity are not poor
• Rareness– a rare tropical disease
• Doesn’t address needs– wants, not needs
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09/29/09 Lesson 1: Scarcity 35
The Goal of Economic Analysis
• Greater “wealth” for individuals and society
• Wealth is the subjective evaluation by individuals of their well being.
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The Question
Given limited resources, how do we best use them to maximize people’s welfare?
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09/29/09 Lesson 1: Scarcity 37
Main Points• Resources are limited• Land, human capital, physical capital, and
entrepreneurship are resources; time and money are not.
• Scarcity is the inability of our limited resources to satisfy our wants.
• Wealth is the subjective evaluation of well being.
• The goal of economic analysis is to increase individual and societal wealth.