Download - Unit 2 Economic Decision Making
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Ms. Ramos
Unit 2Unit 2Economic Economic Decision Decision MakingMaking
Ms. RamosMs. Ramos
Alta Loma High SchoolAlta Loma High School
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Ms. Ramos
Why is what Why is what we want we want scarce?scarce?
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Our Wants Always Exceed Our Wants Always Exceed our Resourcesour Resources
Even the rich have to deal w/ Even the rich have to deal w/ scarcityscarcity
Resources are limited, ex:Resources are limited, ex:TimeTimeMoneyMoney
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With resources limited, With resources limited, scarcity is everywherescarcity is everywhere
Ex: land, labor, materials- are Ex: land, labor, materials- are people willing to turn these over for people willing to turn these over for free?free?
Scarcity would exist even if Scarcity would exist even if everyone was rich!everyone was rich! What if everyone wanted to build What if everyone wanted to build
a home on the beach?a home on the beach?Ms. Ramos
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Shortages are temporary, Shortages are temporary, while Scarcity is foreverwhile Scarcity is forever
Most of us have experienced Most of us have experienced a shortagea shortage
Many reasons for shortagesMany reasons for shortages Shortages are Shortages are temporary, scarcity is temporary, scarcity is forever!!!forever!!!
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http://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htm
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http://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htm
What’s this a
picture of?Katrina. This led to what shortage?
Gasoline and other
southern products
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Ms. Ramos
How do we How do we satisfy satisfy
economic economic wants?wants?
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Look around the Look around the room….what do you see?room….what do you see?
Share with a neighborShare with a neighborAll of the goods were All of the goods were
produced to satisfy produced to satisfy somebody’s wantssomebody’s wants
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Inputs, Outputs, and the Inputs, Outputs, and the Production equationProduction equation
Inputs:Inputs: scarce resources that scarce resources that go into the production processgo into the production process
Factors of production (FofP)Factors of production (FofP) are divided into 3 categoriesare divided into 3 categories Land, labor, capitalLand, labor, capital
Outputs:Outputs: G& S produced using G& S produced using FofPFofP
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ProductionProcess
Inputs Output(G&S)
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Land resources the “gifts of Land resources the “gifts of nature”nature”
Land is more than real estateLand is more than real estate Air, soil, minerals, water, plants, animalsAir, soil, minerals, water, plants, animals
Natural resource vary in abundanceNatural resource vary in abundance Perpetual:Perpetual: widely avail widely avail
•Sunlight & windSunlight & wind Renewable:Renewable: can be replaced as used can be replaced as used
•Forest, fishForest, fish Nonrenewable:Nonrenewable: once used-gone once used-gone
•Oil, coal, natural gasOil, coal, natural gasMs. Ramos
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What are “natures gifts” in What are “natures gifts” in a pencil?a pencil?
httpbattellemedia.comarchives200903search_is_a_pencil_
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httpbattellemedia.comarchives200903search_is_a_pencil_
Nature’s gift in a pencil
Wax
Clay
Graphite
Cedar Wood
Castor Oil (in paint)
Zinc
Rapeseed Oil Pumic
eRubber
Copper
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Labor Resources: Putting Labor Resources: Putting Human Capital to workHuman Capital to work
Labor:Labor: Time & effort to produce Time & effort to produce G&S for wagesG&S for wages
Quantity depends on pop & Quantity depends on pop & willingnesswillingness
Quality depends on skillQuality depends on skillHuman capital:Human capital: knowledge & skill knowledge & skill
from educ & training -from educ & training -IMPORTANT!!!IMPORTANT!!!
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Strong correlation btwn a Strong correlation btwn a country’s level of human country’s level of human capital and standard of livingcapital and standard of living Japan- poor in resources, but Japan- poor in resources, but rich in human capital- among rich in human capital- among wealthiest nationswealthiest nations
Nigeria- rich in oil, poor in Nigeria- rich in oil, poor in human capital- among human capital- among poorest nationspoorest nations
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Gary BeckerGary BeckerNobel Prize winnerNobel Prize winner
Estimates about 75% of Estimates about 75% of the wealth of a modern the wealth of a modern economy consists of the economy consists of the education, training and education, training and skills of its peopleskills of its people - TCI: - TCI: Econ Alive! The Power to ChooseEcon Alive! The Power to Choose
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Capital Resources: Tools, Capital Resources: Tools, Machines, and BuildingsMachines, and Buildings
Financial capital:Financial capital: money moneyPhysical capital:Physical capital: tools, tools,
machines, buildings machines, buildings used in used in the production processthe production process
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Is a car capital?Is a car capital?No if for personal use.No if for personal use.Yes if used to deliver productYes if used to deliver product
•Ex: pizza business/restaurant Ex: pizza business/restaurant buys car to deliver foodbuys car to deliver food
•The school van is a capital The school van is a capital good- it is used to carry out good- it is used to carry out the “production of education”the “production of education”
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Putting it all together: Putting it all together: EntrepreneurshipEntrepreneurship
Combines land, labor, & capital to Combines land, labor, & capital to produce goodsproduce goods
Roles of EntrepreneursRoles of Entrepreneurs Innovator-ideaInnovator-idea Strategist- vision & decisionsStrategist- vision & decisions Risk Taker- invest not knowing Risk Taker- invest not knowing
outcomeoutcome Sparkplug- energySparkplug- energy
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Working Smarter Boosts Working Smarter Boosts ProductivityProductivity
How does one compute How does one compute productivity?productivity? Output divided by inputOutput divided by input
Can be raised two ways- efficiencyCan be raised two ways- efficiency More output from input (labor More output from input (labor
produces more lumber)produces more lumber) Same output from fewer inputs Same output from fewer inputs
(more lumber from tree)(more lumber from tree)Ms. Ramos
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Output: total board feet of lumber
Input: total hours of labor
Productivity: Feet of lumber
produced per hour
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Entreprenuership
Capital
Labor
Land
FactorsOf
Production
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