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What is economics about? What is economics about?
Do you remember the first lessons? Do you remember the first lessons?
Economics is about l______ r_____ Economics is about l______ r_____ versus U___________ wants. versus U___________ wants.
Chp 11-13 TextbookChp 11-13 Textbook
Managing Scarce ResourcesManaging Scarce Resources
The ProblemThe Problem
Scarcity = Scarcity = Limited…Limited… versus unlimited wantsversus unlimited wants
Chp 11-13 TextbookChp 11-13 Textbook
Explain the image below..Explain the image below..
http://footprint.wwf.org.uk/http://footprint.wwf.org.uk/
Chp 11-13 TextbookChp 11-13 Textbook
What to produce?What to produce? How to produce?How to produce? For whom to produce?For whom to produce?
This is known as the Economic Problem! This is known as the Economic Problem!
This leads toThis leads to CHOICECHOICE
Chp 11-13 TextbookChp 11-13 Textbook
Extension: Read top p.43 and write down a sentence for each.
Economic Problem Activity Economic Problem Activity
Can you illustrate ‘The Economic Problem’ Can you illustrate ‘The Economic Problem’ by Linking key economic terms together?by Linking key economic terms together?
Include ‘opportunity cost’. What does this Include ‘opportunity cost’. What does this important economic term mean? important economic term mean?
Chp 11-13 TextbookChp 11-13 Textbook
Draw and explain in Exercise BookDraw and explain in Exercise Book
Chp 11-13 TextbookChp 11-13 Textbook
You watched this video? You watched this video?
Gangnam Style overload
GUESS: GUESS: How many Youtube hits did this video get?How many Youtube hits did this video get?
What could’ve been done instead of What could’ve been done instead of everyone watching this video? everyone watching this video?
Chp 11-13 TextbookChp 11-13 Textbook
Answer Answer
2 billion hits!2 billion hits!
= = At 4:12 minutes, that equates to more than 140m hours
16,000 years.
Chp 11-13 TextbookChp 11-13 Textbook
The Cost of Gangnam style The Cost of Gangnam style
What other achievements were forgone in the time spent watching a sideways shuffle and air lasso? It took 50m man-hours to complete the “supercarrier” USS Gerald Ford last year. Had people not been watching PSY—the South Korean pop star who released the song in July 2012—they could have constructed three such ships.
Chp 11-13 TextbookChp 11-13 Textbook
Opportunity CostOpportunity Cost
““The cost of choice in terms of losing The cost of choice in terms of losing the benefit of the next best the benefit of the next best
alternative. alternative.
I chose to watch Gangnam style along with 2 billion other I chose to watch Gangnam style along with 2 billion other people, in choosing this option the 2 billion people have people, in choosing this option the 2 billion people have
sacrificed an alternative activity for example, building sacrificed an alternative activity for example, building skyscrapers. skyscrapers.
Chp 11-13 TextbookChp 11-13 Textbook
Examples of opportunity costExamples of opportunity cost When people make a choice they must make a When people make a choice they must make a
sacrifice. i.e, they must chose one thing and not sacrifice. i.e, they must chose one thing and not another. another.
You must decide to spend money on food or goods. You must decide to spend money on food or goods.
Family must decide to go on holiday or buy new carFamily must decide to go on holiday or buy new car
Government must decide to build new roads or Government must decide to build new roads or schools instead? schools instead?
Chp 11-13 TextbookChp 11-13 Textbook
Opportunity costOpportunity cost
Weighing up your decisionsWeighing up your decisions
College Student's Opportunity Cost
Would you choose a date over revision? Would you choose a date over revision?
Which choice has lower opportunity cost? Which choice has lower opportunity cost?
Chp 11-13 TextbookChp 11-13 Textbook
I recently bought a pair of shoes which I recently bought a pair of shoes which cost me £40cost me £40
Opportunity CostOpportunity Cost
The TRUE Cost of somethingThe TRUE Cost of something
I can’t have everything I want.I can’t have everything I want.
Have to make a CHOICE Have to make a CHOICE
In buying shoes I have sacrificed the next In buying shoes I have sacrificed the next best alternative (CDs) best alternative (CDs)
Opportunity CostOpportunity Cost
THE BENEFIT FROM THE NEXT BEST THE BENEFIT FROM THE NEXT BEST ALTERNATIVE IS LOST. ALTERNATIVE IS LOST.
The shoes didn’t cost £40, the real cost The shoes didn’t cost £40, the real cost was….was….
The opportunity cost….The opportunity cost….
Opportunity CostOpportunity Cost
Explain with an example how opportunity Explain with an example how opportunity cost is central to the choices we or our cost is central to the choices we or our family make. family make.
E.g. I decided to have a pizza today, E.g. I decided to have a pizza today, thereforetherefore forgoing the option of a sandwich forgoing the option of a sandwich instead. instead. ThereforeTherefore, the opportunity cost of , the opportunity cost of the pizza was the sandwich I sacrificed the pizza was the sandwich I sacrificed instead. instead.
Chp 11-13 TextbookChp 11-13 Textbook
Which patients to treat? Which patients to treat?
You’re a You’re a hospital hospital manager manager and must and must make tough make tough decisions..decisions..
Chp 11-13 TextbookChp 11-13 Textbook
Opportunity CostOpportunity Cost
The cost of c_____ in terms of losing the The cost of c_____ in terms of losing the b______ of the next best a________.b______ of the next best a________.
Explain to your partner then your teacher Explain to your partner then your teacher how the Hospital Manager Task illustrates how the Hospital Manager Task illustrates this problem. this problem.
Chp 11-13 TextbookChp 11-13 Textbook
Can you define / explainCan you define / explain
EconomicsEconomics
Economic ProblemEconomic Problem
ScarcityScarcity
ChoiceChoice
Opportunity CostOpportunity Cost
Chp 11-13 TextbookChp 11-13 Textbook
PPCPPC
Define Define
Production Possibility Curve Production Possibility Curve
The The maximummaximum quantities of different quantities of different combinations of output of combinations of output of two productstwo products, , given given current resources current resources and technology. and technology.
Chp 11-13 TextbookChp 11-13 Textbook
Production PossibilityProduction Possibility
Choice in the National EconomyChoice in the National EconomyGuns
Butter
Chp 11-13 TextbookChp 11-13 Textbook
I can choose to produce ALL guns
or ALL butter.
Or ideally, somewhere in
between.
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0 1 2 3 4 5 6 7 8Units of Meat Pies (millions)
Un
its o
f Bas
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ap
s (m
illio
ns)
A production possibility curveA production possibility curve
Units of BC Units of MPUnits of BC Units of MP
aa 8m 0.08m 0.0 7m 2.2m7m 2.2m 6m 4.0m6m 4.0m 5m 5.0m5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
aa
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Units of BC Units of MPUnits of BC Units of MP
8m 0.08m 0.0 b 7m 2.2mb 7m 2.2m 6m 4.0m6m 4.0m 5m 5.0m5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
bb
A production possibility curveA production possibility curveU
nits
of B
ase
ball
Ca
ps
(mill
ion
s)
Units of Meat Pies (millions)
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Units of BC Units of MPUnits of BC Units of MP
8m 0.08m 0.0 7m 2.2m7m 2.2m c 6m 4.0mc 6m 4.0m 5m 5.0m5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
cc
A production possibility curveA production possibility curveU
nits
of B
ase
ball
Ca
ps
(mill
ion
s)
Units of Meat Pies (millions)
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Units of BC Units of MPUnits of BC Units of MP
8m 0.08m 0.0 7m 2.2m7m 2.2m 6m 4.0m6m 4.0m d 5m 5.0md 5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
dd
A production possibility curveA production possibility curveU
nits
of B
ase
ball
Ca
ps
(mill
ion
s)
Units of Meat Pies (millions)
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Units of BC Units of MPUnits of BC Units of MP
8m 0.08m 0.0 7m 2.2m7m 2.2m 6m 4.0m6m 4.0m 5m 5.0m5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
A production possibility curveA production possibility curveU
nits
of B
ase
ball
Ca
ps
(mill
ion
s)
Units of Meat Pies (millions)
6.6. Production Possibility Boundary or Frontier Production Possibility Boundary or Frontier or or CurveCurve
The production possibility curveThe production possibility curve what the curve showswhat the curve shows
• Unobtainable production – production outside the Unobtainable production – production outside the curvecurve
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A production possibility curveA production possibility curve
Units of Meat Pies (millions)
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ap
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ns)
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xww
A production possibility curveA production possibility curve
Units of Meat Pies (millions)
Un
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f Bas
eba
ll C
ap
s (m
illio
ns)
6.6. Production Possibility Boundary or Frontier Production Possibility Boundary or Frontier or or CurveCurve
The production possibility curveThe production possibility curve what the curve showswhat the curve shows
• Unobtainable production – production outside the Unobtainable production – production outside the curvecurve
• Increasing opportunity costsIncreasing opportunity costs
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A production possibility curveA production possibility curve
Units of Meat Pies (millions)
Un
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f Bas
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ll C
ap
s (m
illio
ns)
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x
y1
1
A production possibility curveA production possibility curve
Units of Meat Pies (millions)
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f Bas
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ap
s (m
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A production possibility curveA production possibility curve
Units of Meat Pies (millions)
Un
its o
f Bas
eba
ll C
ap
s (m
illio
ns)
6.6. Production Possibility Boundary or Frontier Production Possibility Boundary or Frontier or or CurveCurve
The production possibility curveThe production possibility curve what the curve showswhat the curve shows
• Unobtainable production – production outside the Unobtainable production – production outside the curvecurve
• Increasing opportunity costsIncreasing opportunity costs
• Unemployed resources – production inside the Unemployed resources – production inside the curvecurve
v
A production possibility curveA production possibility curve
O
Units of Meat Pies (millions)
Un
its o
f Bas
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ap
s (m
illio
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NowNow
O
Growth in potential outputGrowth in potential output
Units of Meat Pies (millions)
Un
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f Bas
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ll C
ap
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NowNow
O
Growth in potential outputGrowth in potential output
Units of Meat Pies (millions)
Un
its o
f Bas
eba
ll C
ap
s (m
illio
ns)
NowNow
5 years’ time5 years’ time
O
Growth in potential outputGrowth in potential output
Units of Meat Pies (millions)
Un
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f Bas
eba
ll C
ap
s (m
illio
ns)
Outward shift of PPCOutward shift of PPC
Two Reasons;Two Reasons;
Economic GrowthEconomic Growth Change in productive potential of an economyChange in productive potential of an economy
Technological ChangeTechnological Change Improvements in technologyImprovements in technology
Chp 11-13 TextbookChp 11-13 Textbook
What’s the difference? What’s the difference?
Engine v Food.. Engine v Food..
Chp 11-13 TextbookChp 11-13 Textbook
Capital v Consumer GoodsCapital v Consumer Goods
Capital goods tend to be machines and other Capital goods tend to be machines and other man made equipment. They can be used over man made equipment. They can be used over and ____ again (e.g. car trips) and some can and ____ again (e.g. car trips) and some can even make consumer g_______ (e.g. cooker)even make consumer g_______ (e.g. cooker)
Consumer goods on other hand are are Consumer goods on other hand are are n________ made or can only be used n________ made or can only be used ______. They are consumed and must be re-______. They are consumed and must be re-p________. p________.
Chp 11-13 TextbookChp 11-13 Textbook
Which is which Which is which
Chp 11-13 TextbookChp 11-13 Textbook
Car – Capital Carrots – Consumer FishFishing NetWater bottleWater pumpStaplerStaples Ladder Wheat Chicken shwarma BBQ
Draw and Explain Movements and Draw and Explain Movements and ShiftsShifts
Capital Goods
Consumption Goods
Shift
Movement
●
●●
A
B
C
●
●
D
E
Chp 11-13 TextbookChp 11-13 Textbook
PPC Activity PPC Activity
Read p.44-45Read p.44-45
Complete Activity on p.45 Complete Activity on p.45
Chp 11-13 TextbookChp 11-13 Textbook