Mental BellringerThink of a day when you got a lot done. What were

you doing? Why were you able to do it?

Profit Motive• Buy low and sell higher

• People want profits

• Consumer Sovereignty

• Adam Smith “invisible hand”

• Voluntary trade increases wealth

What keeps our economy moving?

Factors of Production• Items we need to be in business• 3 categories + 4th idea• “inputs”

Land• Any natural resource

– Copper mine example

Labor• People working• Wages $• Benefits

Subset of Labor: Human Capital• Skills, experience, education a person has• It’s the reason doctors are paid more than sandwich

artists

Capital• Goods used to create other goods/services• Usually the largest cost for entrepreneurs• Explanation for “Capitalism”

Let’s build a new Circle K!• Land

• Labor

• Capital

New Ideas!Real job creation

• Entrepreneur – French word• Person who takes a risk

combines land, labor and capital to start a new business– OR comes up with a new idea

within a business

Empresario

Draw Circular Flow model on Whiteboards

Experiment• 1 group draws

• 1 group draws

• 1 group draws

Graph Experiment

How could I model this?

Increase productivity?

Productivity• Quantity of output for each unit of input

• For example: • Mechanic can do 4 oil changes per hour• Each oil change requires $8 worth of filter & oil

• “At the margin” increases inProductivity

Another example? Hours studying? Working?

Draw and label 2 good PPFlabel impossible, efficient and inefficient

Increases in productivity• Causes ---------• #1 technology• Others:• Human capital• Cheaper inputs• Health• Globalization

In your groups• How have the factors of production changed (and

become more productive) in the last 20 years• BTW: very easy topic to find in The Economist

US Today Productivity article

• What’s been happening to since 2008?