Focus Writing #9 What did you buy?

1. Write down 3-5 things you purchased in the last week or so. Identify a decision you made for each purchase.

Please turn in focus writing #8

Learning Targets

• Explain what economics means• Explain what the economic problem is• Explain opportunity costs

• Remember – Friday, last day of quarter, HW due on Monday

Economics Brainstorm

Economic Notes handout

• Write down five questions or statements that you think have something to do with economics.

What is Economics?

Economics is a social science that studies:

• How individuals, governments, and businesses make decisions

• Choices of how to get the most from limited resources

• The consequences of those choices

The Economic ProblemUnlimited Needs & Wants

Limited Resources

WHAT to

produce

HOW to

produce

FOR WHOM

to produce

Scarcity

Choices

The Economic Problem1. What goods and services should an economy

produce?– should the emphasis be on agriculture,

manufacturing or services, should it be on education, prisons, or housing?

2. How should goods and services be produced? – labor intensive, land intensive, capital

intensive? Efficiency?3. Who should get the goods and services

produced? – even distribution? more for the rich? more for

those who work hard?

Opportunity Cost

• Definition – the cost expressed in terms of the next best alternative sacrificed (tradeoffs)

• Helps us view the true cost of decision making

• Implies valuing different choices

• Model with Production Possibilities Frontier

Production Possibility FrontiersCars

Bicycles

Y1

X1

A

B

Y2

X2

Assume a country can produce two types of goods with its resources – capital goods and consumer goods

If it devotes all resources to capital goods it could produce a maximum of Ym.

If it devotes all its resources to consumer goods it could produce a maximum of Xm

Ym

Xm

If the country is at point A on the PPF It can produce the combination of Yo capital goods and Xo consumer goods

If it reallocates its resources (moving round the PPF from A to B) it can produce more consumer goods but only at the expense of fewer capital goods. The opportunity cost of producing an extra Xo – X1 consumer goods is Yo – Y1 capital goods.

Production Possibility Frontiers

• Show the different combinations of goods and services that can be produced with a given amount of resources

• No ‘ideal’ point on the curve• Any point inside the curve –resources are not

being utilised efficiently• Any point outside the curve – not attainable with

the current level of resources• Useful to demonstrate economic growth and

opportunity cost

Hospital PPF

MRI’s

Emergency Room Services

Yo

Xo

A.B

CY1

X1

Production inside the PPF – e.g. point B means the country is not using all its resources

It can only produce at points outside the PPF if it finds a way of expanding its resources or improves the productivity of those resources it already has. This will push the PPF further outwards.

Choices and Alternatives• Scarcity requires us to choose between alternatives• Resource: $15• What to spend it on?• Alternatives: CD vs. Pizza

Choice or Alternative

Cost Benefit

CD About $15 staying awake during Mr. Scott’s lectures (by listening to good music)

Pizza About $15 A delicious meal, yum

Exit Question

On your focus writing page How does economics affect you? List

some specific examples from today’s lesson or from the rest of your life.