Goal 7 intro
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Transcript of Goal 7 intro
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Goal 7
Introduction to Economics
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What is Economics?
• Economics: the study of how people seek to satisfy their needs and wants by making choices
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THE FACTORS OFPRODUCTION
GOAL 7: Economics
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There are 4 Factors of Production:
• Land or Natural Resources
• Capital
• Labor
• Entrepreneurship
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Land or Natural Resources
• Materials that are NATURALLY MADE and transformed into something else
• Examples:• Oil• Timber• Land• Crops• Natural gas• Milk
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2 Types of Natural Resources• RENEWABLE– Can be replaced
or renewed or recycled
– ex: wood, water, crops
• NON-RENEWABLE– Once used,
resource is gone– Ex: Oil, Natural
Gas, Gold
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LABOR
• PEOPLE who work to produce a good or service
• Example:– Construction worker– Teacher– Line cook
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CAPITAL
• MAN MADE instruments that assist in making something else
• Examples:– Hammer– Robot– Book– Computer
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Human Capital• Investment
in education or training for a laborer for more productive laborers
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Entrepreneurs• People who RISK
time and money ($) to start their own business
• Examples:– Oprah– Ben & Jerry’s– Little girl selling
Lemonade– Donald Trump
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Needs v. Wants
• Need: something people need that is necessary for survival (ex: air, food, shelter)
• Want: an item we desire but that is not essential to survival
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Three Basic Economic Questions
What good and services should be produced?– Should money go to schools or a new city park??
• How should these goods and services be produced?– How much of the product are we going to produce?
• For whom should these goods and services be produced?– After goods and services have been produced, society must
determine how goods and services should be distributed among members of society…use a price system in the US
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Every CHOICE you make has a…
• Monetary cost: price you paid for a decision ($)
• Trade off: ALL of the alternative choices
• Opportunity cost: the best alternative, your second choice
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Scenario #1
• Dondrick studied for his exam instead of watching American Idol or doing his laundry.
Trade-offs:•American Idol,
laundry
Monetary cost:•none
Opportunity cost:•American Idol
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Scenario #2
• Iesha has decided to go to college instead of getting a full-time job or joining the Navy.
Trade-offs Job, Navy
Monetary costs:
Money paid for college
Opportunity cost: job
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• B’day gift, jacket
Trade-offs:
• Price of the Jordans
Monetary cost: • B’day gift for mom
Opportunity cost:
Scenario #3
• Michael bought a pair of Air Jordans instead of buying his mom a birthday gift or a new jacket for himself.
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Productivity
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How does an assembly line increase a company’s profits?
• Divides up the tasks to make a product and allows a worker to specialize in a task to make it faster• More product = more profit
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Division of Labor
•Dividing up the tasks required to make a product.
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Specialization
• Giving a worker a specific task to complete• Worker becomes a professional in the task
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Automation
• creating a product with the assistance of machinery
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Types of Workers
• Blue Collar:– wage-earning workers who wear work clothes ex:
mechanics, miners, maids • White Collar:
– office and professional workers who do not wear a uniform. Ex: lawyer, teacher, doctor
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Types of Workers
• Skilled workers:– Workers who get special training to do their job,
earn more for their education– Ex: mechanic, teacher, doctor
• Unskilled workers:– workers do not have any special training that
allows them to earn more than a basic wage – Ex: fast food employee, cashier
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What will happen to a company if they add too many factors of production?
• Law of diminishing returns– At a certain point adding another factor of
production will make a company less productive (lose $)
• Graph– What do you think this would look like?
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Law of Diminishing Returns
• The tendency for a continuing effort toward a particular goal to decline in effectiveness after a certain amount of success has been achieved.
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Supply and Demand
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How can comparative advantage influence what a company or country produces?
• Comparative advantage: a country, individual, or company can produce a product at a lower cost than a competitor
• Produce products for less money to make a greater profit
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TYPES OF ECONOMIES
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3 Basic Economic Questions
• What to produce?• How to produce?• For whom to produce?
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• What is produced?– Traditional items are
produced according to custom
• How is it produced?– According to custom,
no specialization or division of labor
• For whom is it produced?– For the local people
Traditional Economy
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Command / Planned Economy
• What is produced?– Gov’t decides what they
believe to be best for the whole country.
• How is it produced?– Gov’t owns companies,
dictate how to make things. Use specialization and division of labor
• For whom is it produced?– Produce only what is needed
for the country
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Market Economy• What is produced?– Whatever sellers want to
produce. Supply and demand are the main factors in decision making
• How is it produced?– Competition exists.
Business is run for profit. Specialization, division of labor used.
• For whom is it produced?– Produce for whoever will
buy in your country and throughout the world
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Mixed Economy
• Most countries have mixed economies. They combine aspects of the 3 economies to make what is best for them.
• Ex: United States– mostly market (individuals buy and sell)– Some command (gov’t rules and restrictions)
– Little traditional (Native American, Amish communities)