Economic Security GET IN GROUPS OF FOUR Take the next 5 minutes and list as many public policies as you can, other than those listed in the previous slide, the are intended to promote Economic Security. Each member of the group with the most after 5 minutes will receive 5 points class cash. NOTE: The same policy and/or program used twice will cancel out.
Economic Stability Economic stability means… no massive swings in the output growth of a nation’s economic system as well as avoiding inflation and deflation. What, again, is the definition of Inflation? Price level increase from year to year.
Economic Stability Economic stability is accomplished through… The Federal Reserve Legislative/Executive Branches
What are your questions?
Domain 1 FUNDAMENTALS of
Our enduring understanding… Economics is… scarc rcity forcing us to make decisions about allocating limited resources to meet our unlimited needs, wants, and desires.
Scarcity and Shortages… Scarcity occurs when Shortages occur there are limited when producers will quantities of not or cannot offer resources to meet goods or services at unlimited needs or current prices . desires.
An Opportunity Cost is… the most desirable benefit given up to take another course of action .
Trade-Offs, on the other hand are… all of the alternatives that we give up up whenever we choose one course of action over others.
The Factors of Production… • Land All natural resources that are used to produce goods and services. • Labor Any effort a person devotes to a task for which that person is paid. • Capital Any human-made resource that is used to create other goods and services. • Entrepreneurship the skills to organize & effectively utilize the production factors
Goods/Services ∞ Producers/Consumers People use these 4 productive resources to produce goods and services that other people want (hopefully) and will consume. The producer then earns a profit if the production costs are less than the selling price that consumers are willing and able to pay.
ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
Natural Resources All natural resources that are used to produce goods and services.
Human Resources Any effort a person devotes to a task for which that person is paid.
Capital Any human-made resource that is used to create other goods and services.
Entrepreneur the skills to organize & effectively utilize the production factors
Section 1 Review 1. What is the difference between a shortage and scarcity? • (a) A shortage can be temporary or long-term, but scarcity always exists. • (b) A shortage results from rising prices; a scarcity results from falling prices • (c) A shortage is a lack of all goods and services; a scarcity concerns a single item. • (d) There is no real difference between a shortage and a scarcity. 2. Which of the following is an example of using physical capital to save time and money? • (a) hiring more workers to do a job • (b) building extra space in a factory to simplify production • (c) switching from oil to coal to make production cheaper • (d) lowering workers’ wages to increase profits
Section 1 Review 1. What is the difference between a shortage and scarcity? • (a) A shortage can be temporary or long-term, but scarcity always exists . • (b) A shortage results from rising prices; a scarcity results from falling prices • (c) A shortage is a lack of all goods and services; a scarcity concerns a single item. • (d) There is no real difference between a shortage and a scarcity. 2. Which of the following is an example of using physical capital to save time and money? • (a) hiring more workers to do a job • (b) building extra space in a factory to simplify production • (c) switching from oil to coal to make production cheaper • (d) lowering workers’ wages to increase profits
Scarcity & Allocating Limited Resources
How to figure out what to get, who gets what, etc..? (ALLOCATION STRATEGIES) What allocation strategy did we see in the movie clip? • First Come, First Served • Force • Price • Sharing • Personal characteristic • Lottery • Majority Rule • Authority • Competition
Scarcity and the H1N1 Virus
Background • In 2009 a mini- epidemic of “swine - flu” broke out across the country • Swine flu is a severe form of flu that combines a mix of several viruses • The symptoms are similar to regular flu, just much more severe • The news began reporting deaths from swine flu in September, which signaled a flurry of people wanting the H1N1 vaccine
Problem? • The production of the H1N1 vaccine had been significantly delayed for multiple reasons • Only 14% of the orders of the vaccine were being filled at one point • In several places riots broke out at health clinics where people were told there was not enough
Problem? • The FDA eventually released a statement saying that while the disease was dangerous for everyone, it was MOST dangerous to the following groups: “Pregnant women, people living with or caring for infants, emergency medical personnel and healthcare workers, children and young adults from 6 months to 24 years and any adult with chronic medical conditions”
Decision Time! You are the manager of a local health clinic. You have 3 doses of the H1N1 vaccine left. The following 9 people come to you for help, to which 3 will you give the vaccine?
Who gets the vaccine? • Jake , a 45 year old widowed male with • Tiara , a 2 year old who easily contracts 3 young children at home. He is willing colds and sickness to pay triple your price • Brooke , a 35 year-old mother of 3 who is 4 months pregnant • Kelly , a divorced 35 year old mother of 2 middle school-aged children who works two jobs to make ends meet • Jo , a 29 year old healthy EMT who actually helped save your grandmother’s life last year • Monique , a 75 year old female who has lived in this community all her life with government health insurance • Tyrone , an 18 year old track star with a full ride scholarship to a major university • Fred , a 45 year old former Olympic gold medalist with a heart condition • Arthur , a 85 year old retired military who does much charity for the veteran who recently suffered a stroke, community, but has very little money but is recovering
How do we allocate resources? • First Come, First Served • Force • Price • Sharing • Personal Characteristic • Lottery • Majority Rule • Authority • Competition
What are your questions?
It’s time for a… Grab an iRespond.
Georgia Standards of Excellence CONCEPT CLUSTER SSEF2 Give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action. • marginal cost • marginal benefit SSEF3 Explain how specialization and voluntary exchange influence buyers and sellers. • Specialization • Voluntary Trade
Markets … • How do we define Marginal cost, marginal benefit, and specialization? • How do free markets operate? • How can markets regulate themselves? • What are the advantages of a free market economy and voluntary exchange?
Marginal Cost is… the cost added by producing one additional unit of a product or service WIDGETS Cost of Production Qty Produced $100 10 $5 $105 11
Marginal Benefit is… additional satisfaction or utility that a person receives from consuming an additional unit of f a good or service
Marginal Benefits and Costs • Economic decisions are always made on the basis of marginal costs and marginal benefits. • For example, we don't make decisions between spending the entire day watching TV or the entire day studying. • Instead, we choose between spending a little more time studying and a little less time watching TV, or vice versa. • So a decision between studying and watching TV involves comparing the marginal benefit of studying with the marginal benefit of watching TV, not comparing their total benefit. • The total benefit of studying could be far greater than the total benefit of watching TV, but after several hours of studying, the marginal benefit of studying could be less than the marginal benefit of watching TV.
Specialization is… a business, , area or economy focuses on the pro roduction of f a limited scope of f pro roducts or r services to gain greater degrees of f pro roductive efficiency within an overall system
Voluntary Exchange is… Free, mutually beneficial, , and non- fr fraudulent exchange of goods and services between buyers and sellers in the marketplace.
The Market’s Self -Regulating Nature • In every transaction, the buyer and seller consider only their self- interest, or their own personal gain. Self-interest is the motivating force in the free market. • Producers in a free market struggle for the dollars of consumers. This is known as competition, and is the regulating force of the free market. • The interaction of buyers and sellers, motivated by self-interest and regulated by competition, all happens without a central plan. This phenomenon is called “the invisible hand of the marketplace.”
Advantages of the Free Market… Economic Efficiency Economic Freedom • As a self-regulating system, • Free market economies have the a free market economy is highest degree of economic efficient. freedom of any economic system. Economic Growth Additional Goals • Because competition • Free markets offer a wider encourages innovation, free markets encourage growth. variety of goods and services than any other economic system.
What are your questions?
Quick Quiz… 1. Why do people need to buy and sell goods or services? (a) People need to buy and sell goods to make a profit. (b) People buy and sell to maintain a competitive society. (c) No one is self-sufficient. (d) People need to provide the market with goods and services. 2. What factors create the phenomenon of the “invisible hand”? (a) incentives and efficiency (b) specialization and efficiency (c) competition between firms (d) competition and self-interest
Georgia Standards of Excellence CONCEPT CLUSTER SSEF4 Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. • Economic Systems • The three basic economic questions
Economic Systems
Economic Systems People create rules for trade that fall along a continuum between command and market . ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
Economic Systems Market Command Georgia Council on Economic Education ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks / w w w . g c e e . o r g
A Parking Lot Full of Incentives
ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
Output Goal Fill the lot.
Output Goal Commrades - Drivers of small and medium cars complain that they are unable to find parking. As a result, I am changing the output goal. Your reward will be according to how many cars you park – the more cars in the lot, the greater the reward.
Output Goal Commrades - Drivers of medium cars continue to complain, and they being joined by many drivers of large cars. As a result, I am changing the output goal again. As before, your reward will be according to how many cars you park – the more cars in the lot, the greater the reward – however, you must have the same number of small, medium and large cars in your lot. Devise your parking plan.
ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks /
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