Unit 1.1: Scarcity

Page 1: Introduction to Scarcity

• Minor Grade is uploading all your grades for the six weeks by unit.

• Objective: Describe and explain concepts of scarcity and opportunity cost through real-world examples.

• Current focus: Unit 1, Topic 1.1.

Page 2: Learning Objectives

• Topic 1.1: Scarcity

  • Learning Objective: Define scarcity and economic resources.

  • Skill 1.A: Describe economic concepts, principles, or models.

• Topic 1.2: Opportunity Cost and the PPC

  • Learning Objective: Define the PPC and related terms.

  • Explain how the PPC illustrates opportunity costs, trade-offs, inefficiencies, efficiencies, economic growth or contraction.

  • Skill 4.A: Draw an accurately labeled graph to represent economic models.

• Topic 1.3: Comparative Advantage

  • Learning Objective: Define absolute advantage and comparative advantage.

  • Explain the benefits of specialization according to comparative advantage.

  • Skill 1.C: Identify economic concepts using quantitative data.

Page 3: What is Economics?

• Economics is the study of behavior concerning how scarce resources are allocated among unlimited needs, wants, and desires.

• Choices are necessary because we cannot have everything we desire.

• Areas of study: choices of individuals, firms, and governments.

Page 4: Positive vs. Normative Economics

• Positive Statements: Based on facts, avoid value judgments (descriptive).

• Normative Statements: Includes value judgments (prescriptive).

• Economists apply the scientific method in theoretical economics to develop theories.

• These theories are then applied in policy economics to address problems and achieve economic goals.

Page 5: Identifying Economic Statements

• Positive Economics: 2, 4, 8

• Normative Economics: 1, 3, 5, 6, 7, 9, 10.

Page 6: Microeconomics vs. Macroeconomics

• Microeconomics: Examines decisions of small economic units (individuals/firms) and their consequences (e.g., supply and demand).

• Macroeconomics: Studies the economy as a whole or economic aggregates (e.g., inflation, government spending, unemployment).

Page 7: Identifying Economic Concepts

• Macroeconomics Statements: 1, 2, 4

• Microeconomics Statements: 3, 5, 6.

Page 8: Key Economic Assumptions

• Questions to consider:

  1. What and how much to produce?

  2. How to produce it?

  3. From whom to produce it?

• Reasons: Scarcity leads to limited resources and unlimited wants.

Page 9: Choices from Scarcity

• Individuals/societies must make choices due to resource scarcity.

• Factors of Production: Land, Labor, Capital, Entrepreneurship.

• Payment Forms: Rent, Wages, Interest, Profit.

Page 10: Opportunity Cost

• Opportunity Cost: The benefit forgone of the next best alternative when a choice is made.

• Important in cost/benefit decision-making.

• Example: Opportunity cost of sleeping an extra hour vs. watching content online.

Page 11: Making Choices in College

• Title: "Econ of College"

• Choices impacting good grades: Social life, enough sleep.

Page 12: Trade-offs vs. Opportunity Cost

• Trade-offs: All alternatives given up when making a choice.

• Opportunity Cost: Most desirable alternative sacrificed.

• Example: Trade-offs of attending college (e.g., attending events, working).

Page 13: Application of Economics

• Key principles:

  1. Unlimited wants & limited resources = scarcity.

  2. Choices arise from scarcity, resulting in trade-offs.

  3. Aim: Maximize satisfaction.

  4. Decisions based on marginal costs vs. marginal benefits.

  5. Real-life situations analyzed through models and graphs.

Page 14: Evaluating Opportunity Costs

• Questions to consider for evaluating opportunity costs of college (e.g., attending Harvard vs. UH).

Page 15: Marginal Analysis

• Marginal Cost: Additional cost above previously incurred costs.

• Marginal Benefit: Additional benefit above what has accrued.

Page 16: Example of Marginal Analysis

• Cost and benefit analysis of watching a movie multiple times:

• 1st time: Benefit = $30, Cost = $10.

• 2nd time: Benefit = $15, Cost = $10.

• 3rd time: Benefit = $5, Cost = $10.

• Total: Benefit ($50) exceeds Cost ($30) for first two views.

Page 17: Visual Interpretation

• Graph interpretation showing cuteness vs. number of legs.

Page 18: Probability and Relationships

• Graph depicting probability of being right in dating relationship status.

Page 19: Childhood Preferences

• Personal enjoyment graphs related to different age groups and interests.

Page 20: Preferences in Video Games

• Graphs depicting usefulness of shotguns in different video games.

Page 21: Decision Principles

• If Marginal Benefits (MB) exceed Marginal Costs (MC), proceed with the action.

• If MC exceeds MB, then do not proceed.

Page 22: Importance of Marginal Analysis in Economics

• Marginal Analysis: Importance of evaluating additional benefits/costs while making decisions.

• Example of going to the mall: Continuous evaluation of benefits and costs.

• Decision-making influenced by situational changes (e.g., unexpected encounters).