“Ya can’t always get want ya want…”

Mick Jagger, The Rolling Stones, 1969

12.1 Students understand common economic terms and concepts and economic reasoning. 12.4 Students analyze the elements of the U.S. labor market in a global setting. 12.5 Students analyze the aggregate economic behavior of the U.S. economy.

With Limited Resources, Scarcity is Everywhere

• Goods seem to be everywhere!– Physical objects

• Services seem to be everywhere!– Activities done for us by others

• Shortages are temporary, scarcity is forever– Shortage: lack of something that is desired (occurs

when less of a good or service available)• Fashion Fad, Wars, Disasters can disrupt production,

Restaurant specials!• Finite…

Economic Decision Making

• Our Wants Always Exceed Our Resources– Food, shelter, water– Our ability to satisfy our wants (and

sometimes our needs) is limited• Time• Bill Gates

How Do We Satisfy Economic Wants?

• Factors of Production– Inputs: scarce resources that go into the

production process– Outputs: goods and services that are

produced by using resources– Production Equation:

• Land + Labor + Capital = Goods and Services• (entrepreneurship: willingness to take

economic risks) - #4?

Land Resources: The “Gifts of Nature”

• All of the natural resources– Perpetual resources

• Solar, wind

– Renewable resources• Forests, fresh water, fish

– Nonrenewable resources• Fossil fuels

Labor: Putting Human Capital to Work

• Produces goods and services for a wage• Human Capital: strip person of all but self and what

skills are left?– “High Human Capital” = lots of skilled workers– “Low Human Capital” = unskilled workers

CORRELATION BTW LEVEL OF HUMAN CAPITAL AND STANDARD OF LIVING

(Japan vs Nigeria)

“75% of a countries wealth lies with the education, training, and skills of its people” – Gary Becker

Capital Resources: Tools, Machines, and Buildings

• Physical Capital or Capital Goods– Used in the production of goods and services– Difference btw “consumer good” vs. “capital

good”– Physical capital can replace labor

• (vacuum cleaner, ATM machines)

Entrepreneurship as a form of Human Capital

• Combines land, labor, and capital in new ways to produce goods and services

• Roles:– Innovator: new inventions/technologies– Strategist: vision and key decisions – Risk Taker: investment challenges/succeed or

fail?– Sparkplug: turns ideas into reality

• Nolan Bushnell (Atari/Chuck E. Cheese)

Working Smarter Boosts Productivity

• Use inputs effectively, can increase productivity

• Productivity ratio: productivity = output input

*Lumber mill: output = total number of board feet, input = total hours of labor,

productivity = board feet of lumber produced in an hour

***How could productivity be increased?

Maximizing Utility: What we want when we choose

• Utility = satisfaction one gains from consuming a product or service or from taking an action– Improving our lives (vaccinations)

• Tradeoffs: scarcity-forces-tradeoffs– Business as well as individuals– “guns vs butter” analogy

• Opportunity cost: The best thing we give up to get what we want – Value of the next best alternative

• IPhone vs Blackberry

Making “how much” decisions at the Margin

• Marginal Utility = extra satisfaction from on addition of unit of a good or service– Marginal utility diminishes as you get more– Negative utility = going overboard• Apple juice/homeless person example

*law of diminishing marginal utility

How can we measure what we gain and lose when making choices?

• Production Possibilities Frontier – Economic model using a line graph– Use of two (2) goods– Combination of production of both goods

using available resources/technology most efficiently

• Study hours for Math and/or History• Production Possibilities Curve or Frontier:

available combinations with current resources

PPF Example

Measuring Opportunity Costs Using the PPF

• Bananas vs cell phones?– Finite land for factories or plantations– Labor trained for bananas or cell phones– Analysis of the combinations…

• Economic efficiency using the PPF– Using resources to produce maximum results– Each point on graph represents efficient use of

resources– Snapshot of an economy’s production

possibilities