Unit 8, Lesson 1Unit 8, Lesson 1Fundamental Fundamental EconomicsEconomics

Agenda:Agenda:1.1.ORCA / remindersORCA / reminders2.2.Fundamentals of econ Fundamentals of econ notesnotes3.3.Resources & Scarcity videoResources & Scarcity video

Outcome: students will be able to Outcome: students will be able to describe examples of choice in a describe examples of choice in a market economy. market economy.

Economic ChoicesEconomic Choices► We use economics We use economics

everydayeveryday► Economics: study of how Economics: study of how

we make decisions about we make decisions about how to distribute limited how to distribute limited resourcesresources

► Needs vs. Wants; Needs vs. Wants; differencedifference

► The fundamental The fundamental economic problem is the economic problem is the issue of scarcityissue of scarcity

► Scarcity: when we do not Scarcity: when we do not have enough resources to have enough resources to produce all of the things produce all of the things we would like to have we would like to have

What, How, For WhomWhat, How, For Whom► Unlimited wants + limited Unlimited wants + limited

resources = scarcity; what resources = scarcity; what does society dodoes society do

► Each society has to choose Each society has to choose WHATWHAT to produce; choices? to produce; choices?

► Each society must choose Each society must choose HOWHOW to produce; examples? to produce; examples?

► After goods are produced After goods are produced each society must decide each society must decide FOR WHOM FOR WHOM are these are these goods for; in the US we use goods for; in the US we use a price systema price system

► These are hard questions These are hard questions that every country must that every country must answeranswer

► HOW should we get HOW should we get energy?energy?

Using Economic ModelsUsing Economic Models► Economists often Economists often

formulate theories about formulate theories about how economies work from how economies work from the data they collectthe data they collect

► These theories become These theories become economic modelseconomic models

► Economic models: Economic models: simplified representations simplified representations of the real world that used of the real world that used to help predict what will to help predict what will happen in the economyhappen in the economy

► Models are based on Models are based on assumptions; are these assumptions; are these models facts? models facts?

Market EconomyMarket Economy► The United States has a

market economy, often described as capitalism

► Market economy: system in which supply, demand, and prices help people make decisions and allocate resources

Market EconomyMarket Economy► Capitalism: private citizens

own most, if not all, means of production

► Businesses are allowed to compete for profit with a minimum of government interference

► Most economic decisions are made by individuals looking out for their own and their families’ self interest

► The choices you make and businesses make affect what you buy and what businesses produce

Understanding Your Role Understanding Your Role ► Keeping informed is important Keeping informed is important

to understanding economics; to understanding economics; ways to get informed?ways to get informed?

► Smart citizens should Smart citizens should understand how incentives understand how incentives affect people’s economic affect people’s economic decisionsdecisions

► Incentives: rewards that are Incentives: rewards that are offered to get people to take offered to get people to take certain actionscertain actions

► The role of government should The role of government should be to maintain competitive be to maintain competitive markets, not to help one markets, not to help one group over anothergroup over another

► Government can support their Government can support their goals by offering incentives or goals by offering incentives or punishing; carrot or stick punishing; carrot or stick approachapproach

Economics USA: Resources & Economics USA: Resources & Scarcity Scarcity

http://www.learner.org/series/econusa/unit14/

Listen very carefully, and answer the questions on your video sheet.

There will be three examples presented to you throughout the video (WWII, 1979, 1980s)

Pay attention to what the economist says and the explanation of the Production Possibilities Curve.