qod #2: wants & needs a lesson in scarcity & rationing ......before deciding how you will...
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QOD #2: Wants & Needs A lesson in scarcity & rationing Economic Way of Thinking HW: Parent Syllabus Review
Read pp 29-34 Questions 1,2,3
AGENDA Thurs 8/20
It is Friday night. Your only chunk of free time all weekend is tonight from 6:00 to 11:00. Before deciding how you will spend this time, consider these factors:
• You have $40 to spend. • You have an AP Econ quiz Monday. • This is the first football game of the season. • It is your mother’s birthday. • Someone you like has asked you out on a date. • Your favorite band is in town tonight. Fill in a table like the one below showing how you plan to spend your time. Create your own
activities or choose from the list of possible activities. If you choose an activity from the list, use the given time and price.
Football game: 3 hours, $5 Dinner: 2 hours, $20 Movie: 2 hours, $10 Concert: 4 hours, $40 Study for test: variable time, $0 Hang out at friend’s house: variable time, $0 Work at job: variable time, earn $10 per hour Family time: variable time, $0
TIME ACTIVITY PRICE
6:00 p.m.
7:00 p.m.
8:00 p.m.
9:00 p.m.
10:00 p.m.
1. What choices did you have to make in this exercise?
2. What constraints did you face when making these decisions?
3. For each decision you made about how to spend your time, what opportunity cost did you incur?
4. Describe your purposeful behavior as it relates to the utility of your choices.
As you watch the clip from Titanic, write down examples of scarcity, rational self-interest, marginal benefits, marginal costs and opportunity costs.
With your partner, discuss the following questions and record your thoughts:
1. What are the scarce goods and how are they rationed among the passengers?
2. As the Titanic begins to sink, how does “life or death” scarcity change the way goods are rationed among passengers?
Thinking in terms of: Example of this type of thinking:
Marginal Benefit
Marginal Cost
Trade-offs
Positive economics
Normative economics
Effective decision making requires comparing the additional costs of alternatives with the additional benefits.
Most choices involve doing a little more or a little less of something: few choices are "all or nothing" decisions.
A situation in which more of one thing means less of something else. Ex. If a country spends more
on national defense than it will have less to spend on health care or education.
1.Land- natural resources
2.Labor- physical & mental talents that contribute to the production of goods & services
3.Capital- produced goods used as resources for further production..i.e. tools, computers, machinery ▪ Investment: aid in production/accumulation of capital goods
4. Entrepreneurship – special talent for taking advantage of new business opportunities
Shows the maximum amount of two
products that can be made in this time
period with current resources and
technology
● Resource Allocation
● Resource Reallocation
● Opportunity Cost
● Economic Growth
● Changes in Productivity
● Changes in Efficiency
Type of Product
Pizzas
(in hundred thousands)
Industrial Robots
(in thousands)
Production Alternatives
A B C D E
10 9 7 4 0
0 1 2 3 4
Plot the Points to Create the Graph…
Production Possibilities Model
LO5 1-11
Q Corn
M
Q Wheat O
L
Resource Allocation – a given use of land,
labour and capital
For instance, the farmer can opt to use all
resources to produce combination A:
A R
S
•OR Corn and •OS wheat
R
Q Corn
M
Q Wheat 0
L Alternatively the farmer can use all
current resources and be at point B
on PPC and produce:
•OT corn and
B T
V
•OV wheat
Q Corn
M
Q Wheat 0
L
B T
V
A
S
R
Switching factors of production
to alternative uses is called
reallocation of resources
For instance, reallocating land,
labour and capital from corn
production into wheat means
moving from A to B
How much
wheat is gained
and how much
corn is lost?
Q Maize
M
Q Wheat
L
B
A R
0 V S
T
The economic decision to move from A to B and product
more wheat involves a sacrifice –LOST CORN
Opportunity Cost – Measurement
of cost by reference to the
alternatives forgone
The opportunity cost of SV
extra wheat is RT corn
forgone
GAIN
LO
SS
Q Corn
M
Q Wheat
L
A R
0 S
The farmer is at point A
What is the opportunity cost of
producing OR corn?
At A - OS wheat is being produced
SM extra wheat could be produced
if all resources are put into wheat
The opportunity
cost of OR corn
is SM wheat
Using the data on the worksheet, create a PPC on your
own and answer the questions.
ASK FOR HELP IF NECESSARY!
Questions 10-12 Problems #1-8