StarterWhat are you going to do

tomorrow? What alternatives do you have? What could you do with

your time? If you can’t do what you had planned, what is the next best

alternative?

The Economic Problem and Efficiency

• understand the problem of unlimited wants & finite resources – opportunity cost & scarcity

• be able to discuss the main economic resources (land, labour capital, enterprise) and the difference between renewable and non-renewable resources

Desert Island

You are one of 100 people stranded on an island which has sufficient resources to allow you to survive. A terrible event has occurred and as far as you know you are the only people left in the entire world!

Your aim is to make decisions about how you are going to organise yourselves.

Decision ONE

An argument has started over some land. One of the group,. Khadra, has discovered a place on the island where the soil is particularly fertile and fruit trees abound. She also wants a section of land on which to build a hut – this is near to one of several fresh water supplies which she feels she should control access to (Since she found it). Some people disagree, especially Amy, Jesse and Viren says that no-one should be able to “Own” any of the natural

resources.What is your opinion?

Make a group decision

Decision 2

In the early days most decisions seemed easy and just happened without anyone thinking about them. But a member of the group, Shannon, a former company director, is emerging as an influential character and wants to be leader. SHE knows that she’s not the most popular figure but she feels that she has the skills to do the job. Others believe, including Amber, Rebecca and Kirstie, that everyone should have a say in decisions, at least anyone old enough to have an opinion.How do you think decisions should be

made?

Decision 3

One member, Darrel used to be a skilled crafts person and has started to make baskets and furniture which he intends to trade for other goods and services. He says that everyone should look after themselves and their families. Others are not happy about this, saying that it will cause division. They want to plan in a communal way with everybody having a say in what should be produced: Everyone should fit in and work for the common good.So will it be “doing your own thing” or “co-operation” Make your decision.

You have decided that Fishing – at least – is a communal activity but arguments are breaking out about sharing the catch. Fred Catchacod works hard and is so skilled that he feels he deserves more than Larry Lazybones who contributes very little. Larry however argues that he simply lacks Fred’s skills and shares similar needs therefore entitling him to his fair share.

How do you think the catch should be shared out – to each according to their need or depending upon skills and effort.

You have survived for a year and thoughts are turning to the future (there are 20 children under 10 and 4 new arrivals!) Some say (mainly Isabella, Jay and Seda) that there is no point in having any kind of school system – it would be a waste of resources and should be left to parents. Others (Amy, Jesse and Mina) believe that education is vital and all adults should give up some time to teach the children reading, writing, basic numeracy and practical skills. They accept that this would mean some reduction in production and freedom of choice.

Should scarce resources be used for community schooling or not. How important is education on the island?

The Economic Problem?

Limited Resources

Unlimited Wants

THE BASIC ECONOMIC PROBLEM

There are only a limited number of resources such as workers, machines, factories, raw materials etc. Yet there are a number of different ways in which the could be used.

Similarly people only have a limited amount of money. Yet they have lots of needs and wants to satisfy

THE BASIC ECONOMIC PROBLEM

Also the Government has a limited amount of money 440 billion!!!

THE BASIC ECONOMIC PROBLEM – the problem arises because resources are scarce, but human wants are unlimited.

THE BASIC ECONOMIC PROBLEM

The Economic Answers What goods and services should an economy

produce? How should goods and services be produced? Who should get the goods and services

produced? Opportunity cost – the benefit lost from the next

best alternative

Opportunity Cost With fees and living expenses, it is estimated to cosy

£50,000 to go to University for 3 years.

What might be the opportunity cost of the £50,000 in fees and living expenses:

a) To parents if they pay them on behalf of the children

b) To students if they have to borrow the money to pay them?

What resources does the UK have available?

Factors of Production

(resources used in the production process)

FACTORS OF PRODUCTION

LANDLABOUR

ENTREPRENEURSHIPCAPITAL

Classify each of the following resources:

HUMAN NATURAL

RENEWABLE NON-RENEWABLE

PRODUCED

TIMBER SERVICES OF A WINDOW CLEANER

NATURAL GAS SOLAR ENERGY

A COMBINE HARVESTER

A COMPUTER PROGRAMMER WHO SETS UP A COMPANY TO MARKET HIS SOFTWARE

A COMPUTER

GIVE ME YOUR OWN EXAMPLE OF EACH?

Factors of Production

The inputs into that a firm needs

to be successful

Factors of Production

INPUTS• land• people• capital equipment• materials and components• finance• enterprise

OUTPUTS• goods• services• waste products

ADDS VALUE

TRANSFORMATION PROCESS

Discussion: “Why are some countries so

poor and other so rich?”

Factor endowment = the stock of factors of production

The worlds poorest countries generally have few and/or poor quality factor endowments.

• Managers have the same problem, what do they want to produce?

• What factors of production do they have at their disposal?

• Do they have factor endowment?

Factor endowment

YOUR RESEARCH TASK.... Pick a country

What are the factors of production available to that country?

Give some general stats... (A02)

What impact does that have on that country? (A03)

Evaluate the long term economic growth potential of that country (A04)

FACTORS OF PRODUCTIONLAND LABOUR CAPITAL ENTREPRENEURSHIP

IMPACT.... (AO2/3)

ECONOMIC GROWTH POTENTIAL (AO4)

COUNTRY:

4 factors of production and their rewards…

This video looks at how New York City’s mayor Michael Bloomberg is trying to encourage smaller businesses to build up the economy in the wake of the corporate US meltdown. Following the video the class could be divided in small groups (2/3 students). Give each group one of the four factors of production. Each group must make a list of ways which their factor of production could be improved, either by increasing the quantity or the quality.