Ms. Ramos

Unit 2Unit 2Economic Economic Decision Decision MakingMaking

Ms. RamosMs. Ramos

Alta Loma High SchoolAlta Loma High School

Ms. Ramos

Why is what Why is what we want we want scarce?scarce?

Ms. Ramos

Our Wants Always Exceed Our Wants Always Exceed our Resourcesour Resources

Even the rich have to deal w/ Even the rich have to deal w/ scarcityscarcity

Resources are limited, ex:Resources are limited, ex:TimeTimeMoneyMoney

Ms. Ramos

With resources limited, With resources limited, scarcity is everywherescarcity is everywhere

Ex: land, labor, materials- are Ex: land, labor, materials- are people willing to turn these over for people willing to turn these over for free?free?

Scarcity would exist even if Scarcity would exist even if everyone was rich!everyone was rich! What if everyone wanted to build What if everyone wanted to build

a home on the beach?a home on the beach?Ms. Ramos

Shortages are temporary, Shortages are temporary, while Scarcity is foreverwhile Scarcity is forever

Most of us have experienced Most of us have experienced a shortagea shortage

Many reasons for shortagesMany reasons for shortages Shortages are Shortages are temporary, scarcity is temporary, scarcity is forever!!!forever!!!

Ms. Ramos

http://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htm

http://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htm

What’s this a

picture of?Katrina. This led to what shortage?

Gasoline and other

southern products

Ms. Ramos

How do we How do we satisfy satisfy

economic economic wants?wants?

Ms. Ramos

Look around the Look around the room….what do you see?room….what do you see?

Share with a neighborShare with a neighborAll of the goods were All of the goods were

produced to satisfy produced to satisfy somebody’s wantssomebody’s wants

Ms. Ramos

Inputs, Outputs, and the Inputs, Outputs, and the Production equationProduction equation

Inputs:Inputs: scarce resources that scarce resources that go into the production processgo into the production process

Factors of production (FofP)Factors of production (FofP) are divided into 3 categoriesare divided into 3 categories Land, labor, capitalLand, labor, capital

Outputs:Outputs: G& S produced using G& S produced using FofPFofP

Ms. Ramos

ProductionProcess

Inputs Output(G&S)

Ms. Ramos

Land resources the “gifts of Land resources the “gifts of nature”nature”

Land is more than real estateLand is more than real estate Air, soil, minerals, water, plants, animalsAir, soil, minerals, water, plants, animals

Natural resource vary in abundanceNatural resource vary in abundance Perpetual:Perpetual: widely avail widely avail

•Sunlight & windSunlight & wind Renewable:Renewable: can be replaced as used can be replaced as used

•Forest, fishForest, fish Nonrenewable:Nonrenewable: once used-gone once used-gone

•Oil, coal, natural gasOil, coal, natural gasMs. Ramos

What are “natures gifts” in What are “natures gifts” in a pencil?a pencil?

httpbattellemedia.comarchives200903search_is_a_pencil_

Ms. Ramos

httpbattellemedia.comarchives200903search_is_a_pencil_

Nature’s gift in a pencil

Wax

Clay

Graphite

Cedar Wood

Castor Oil (in paint)

Zinc

Rapeseed Oil Pumic

eRubber

Copper

Ms. Ramos

Labor Resources: Putting Labor Resources: Putting Human Capital to workHuman Capital to work

Labor:Labor: Time & effort to produce Time & effort to produce G&S for wagesG&S for wages

Quantity depends on pop & Quantity depends on pop & willingnesswillingness

Quality depends on skillQuality depends on skillHuman capital:Human capital: knowledge & skill knowledge & skill

from educ & training -from educ & training -IMPORTANT!!!IMPORTANT!!!

Ms. Ramos

Strong correlation btwn a Strong correlation btwn a country’s level of human country’s level of human capital and standard of livingcapital and standard of living Japan- poor in resources, but Japan- poor in resources, but rich in human capital- among rich in human capital- among wealthiest nationswealthiest nations

Nigeria- rich in oil, poor in Nigeria- rich in oil, poor in human capital- among human capital- among poorest nationspoorest nations

Ms. Ramos

Gary BeckerGary BeckerNobel Prize winnerNobel Prize winner

Estimates about 75% of Estimates about 75% of the wealth of a modern the wealth of a modern economy consists of the economy consists of the education, training and education, training and skills of its peopleskills of its people - TCI: - TCI: Econ Alive! The Power to ChooseEcon Alive! The Power to Choose

Ms. Ramos

Capital Resources: Tools, Capital Resources: Tools, Machines, and BuildingsMachines, and Buildings

Financial capital:Financial capital: money moneyPhysical capital:Physical capital: tools, tools,

machines, buildings machines, buildings used in used in the production processthe production process

Ms. Ramos

Is a car capital?Is a car capital?No if for personal use.No if for personal use.Yes if used to deliver productYes if used to deliver product

•Ex: pizza business/restaurant Ex: pizza business/restaurant buys car to deliver foodbuys car to deliver food

•The school van is a capital The school van is a capital good- it is used to carry out good- it is used to carry out the “production of education”the “production of education”

Ms. Ramos

Putting it all together: Putting it all together: EntrepreneurshipEntrepreneurship

Combines land, labor, & capital to Combines land, labor, & capital to produce goodsproduce goods

Roles of EntrepreneursRoles of Entrepreneurs Innovator-ideaInnovator-idea Strategist- vision & decisionsStrategist- vision & decisions Risk Taker- invest not knowing Risk Taker- invest not knowing

outcomeoutcome Sparkplug- energySparkplug- energy

Ms. Ramos

Working Smarter Boosts Working Smarter Boosts ProductivityProductivity

How does one compute How does one compute productivity?productivity? Output divided by inputOutput divided by input

Can be raised two ways- efficiencyCan be raised two ways- efficiency More output from input (labor More output from input (labor

produces more lumber)produces more lumber) Same output from fewer inputs Same output from fewer inputs

(more lumber from tree)(more lumber from tree)Ms. Ramos

Output: total board feet of lumber

Input: total hours of labor

Productivity: Feet of lumber

produced per hour

Ms. Ramos

Entreprenuership

Capital

Labor

Land

FactorsOf

Production

Ms. Ramos