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Scarcity and Choice

You have been tasked with making Widgets and Wajamas

Widget: tear a piece of paper in half, fold it twice hamburger-style, and staple it in the center

Wajama: fold a sheet of paper 3 times hot dog-style Production Rules:

Round 1: 45 seconds to make Widgets Round 2: 45 seconds to make Wajamas Round 3: 45 seconds to make Widgets and Wajamas

Widgets and Wajamas

The government spends thousands of billions of dollars every year

Even though this is a lot, this money is still scarce

The US Government and the people of the US have unlimited wants/needs and limited resources

They have to make a choice about what to spend it on

Each year, the President proposes a budget that Congress has to approve

Compromising on this is one of the biggest struggles our current government is going through

The Government

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Supply and Demand

Stock of a certain item that can be provided to people that want it

Amount of a product that producers are willing and able to sell at a certain price

Ex: Nike is willing to make and sell 50,000 Air Nichols shoes for $150 each

Supply

How much people want! Amount of a product that consumers are

willing and able to buy at a certain price Ex: The demand for Air Nichols shoes

would be very low if they were sold for $150. Now, if they sold them for $15… sweet deal! High demand!

Demand

Pay attention and figure out how much is demanded of their product at a certain price and supply that much

If they supply TOO MUCH and put more on the shelves than people are willing to buy, that makes a surplus.

If they supply TOO LITTLE, the stores will run out and more people will still want to buy the product! This makes a shortage.

Businesses must find the right balance…this is the point of equilibrium on the graph.

Smart Businesses…

The more potential profit! But… people have a limit to how much they

will pay for something The amount demanded will go down if the

price goes too high As the price goes up, the quantity demanded

goes down P D As the prices goes down, the quantity

demanded goes up (think of a sale!) P D

The higher the price…

Soda at the Movie Theatre

Back-to-the Future DVD

Pizza Slices

As consumers, we make decisions about what to buy based on many things

A big deciding factor is price, but that’s not the only thing

Any factor that helps convince us to do a certain thing is an incentive

Some incentives for consumers: Coupons attached to the package Better, more appealing advertising/Celebrity endorsements Name-brand recognition Convenience (close, quick, accessible) ________________________________________

Why we do what we do