Vocabulary

• Trade-off- The act of giving something up to gain something else.

• Opportunity Cost- The value of the alternative that was lost in a decision.

• Economic Decision Making Model- Used to make decisions on the best way to use our limited resources.

• What is economics?• What is the fundamental problem with economics?• What 3 questions should you ask yourself when starting a

business?• What do economists use to collect data?• Summarize the difference between goods and services.• What are factors of production?• What are the four kinds of factors of production?• Summarize the difference between renewable and nonrenewable

resources.• What two attributes are a part of labor?• What are examples of capital?• What is an entrepreneur?• What is productivity?

Warm up?

• What is the fundamental economic problem?• Scarcity

Warm up?

1. Those things that people must have to live are called what?

A. Natural resourcesB. WantsC. NeedsD. Renewable natural resources

2. Which of the following is not one of the 4 basic factors of production?

A. LandB. TimeC. LaborD. Entrepreneurship

Scarcity

Scarcity

• Scarcity/limited resources is the lack of adequate resources to obtain all of one’s wants or needs.

• The more scarce an item is, the more it costs.

• The reason we must make economic choices is because of scarcity

• When producers and consumers make economic choices they do so to receive a benefit.– Because we live in a world

where resources are limited we must follow an economic decision making model

Pricing • Producers

– Want to sell their goods and services for as high a price as possible

– Must consider salaries for laborers

• Consumers – Seek to pay as low a price as

possible to obtain them

• Price results when producers find the highest price they can charge and consumers find the lowest price at which they can buy goods.

Decision Making ModelDefine the Problem

List the Alternatives

Option 1Option 2

Option 3

State the Criteria

Evaluate the Alternatives

Make a Decision

Option # ?

Decision Making Model

• Trade-off– The act of giving up one thing of value

to gain another thing of value.

• Opportunity cost – The value of the alternative option

that is lost when one makes the decision

– This cost is more than just money– Ex: Opportunity cost of cleaning your

house is more than just cleaning supplies. Also, includes the time you can spend doing other things.

• Benefit– What you gain from making a

decision.

Identify the costs & benefits of these decisions.

• Cody decided not to study for his math test so he could play Call of Duty. Which one of these is the cost?– Cody got to play video games.– Cody failed his math test and got grounded.

• Tony was unable to exercise so that his house was clean for company to come over. Which one of these is the benefit?– Tony was unable to workout.– Tony’s house was clean for company.

Identify the costs & benefits of these decisions.

• Courtney decided to go to the movies with Reji so she was unable to eat dinner with Bell. Which one of these is the cost?– Courtney and Reji had fun at the movies.– Bell was mad and bought a voodoo doll so she could put

a curse on Courtney.

• What happens to the cost of an item when it is scarce?• Why is it that we must make economic choices?• What is a trade off?• What is opportunity cost?• What is a benefit in regard to economic decision

making?• What is the goal of producers?• What is the goal of consumers?• How do producers come up with a price?

reflection

• What do people expect to receive from taking an economic action?

• A benefit

Closing Question