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Econ 101 - Scarcity, Opp Cost, FOPs, thinking at the margin

Econ 1st 6wks Ch1
by

Gabriel Hernandez

on 16 August 2016

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Transcript of Econ 101 - Scarcity, Opp Cost, FOPs, thinking at the margin

Scarcity and Opportunity Costs
Economics
is the study of how people seek to satisfy their needs and wants by making choices.

A
need
is something necessary for survival such as air, food, or shelter.

A
want
is an item that we desire but that is not necessary to survive.

Goods
are items that are tangible, such as books, pens, salt, shoes, hats and folders.
Services
are actions or activities that one person buys from another such as cleaning, haircuts, or fixing things.
Services
are intangibles provided by other people, such as doctors, lawn care workers, dentists, barbers and waiters.
Scarcity
always exists because the needs and wants of people are always greater than the supply of goods and services. There is a limited supply of resources to meet unlimited wants, and competition exists for these goods & services.
Opportunity cost
is the most desirable object or activity that you give up when you make a decision.; it is the value of what is given up to obtain something else

Trade-offs
are all the
alternatives
that we give up whenever we choose one action over another.
For example . . .
If you choose to buy a home theater instead of going to Hawaii, then the vacation is the opportunity cost (lost).
You can save money on a flight by making a connection (stop) along the way. A direct flight would be faster and more convenient, but more expensive. The time and convenience you lose are the opportunity cost.
We can use a Decision-Making Grid (p.10) to help make decisions about Opportunity Cost.
Think about what course of action you took that resulted in your assignment to ALC-W.
What are the trade-offs (all alternatives) & opportunity cost (most desirable alternative given up)?
What would the trade-offs & opportunity cost be if you continue to make similar choices in the future?
We must think about the benefits to be gained, and what will be lost (the opportunity cost).
They also consider
thinking at the margin
.
When economists think about a decision they look at opportunity plus other factors.
thinking at the margin is when someone decides how much more, or how much less
Economic Common Sense Rule:
You can't have (possess) your cake & eat it too.
You must choose whether to possess the cake or to eat it, but you can't have it both ways . . . there is a
trade-off
.
Opportunity cost
represents the most desirable thing you give up when you make a decision.

Remember . . . there is always a COST and a BENEFIT to each decision.
A
shortage
is different from scarcity.
A shortage occurs when producers will not or cannot offer goods or services at the current prices.
A shortage occurs when there is excess demand; therefore, it is the opposite of a surplus
Before a hurricane a customer may find store shelves empty, and then return 7 days later and they are completely filled.
A shortage may be short-term or long-term.
The student can't pick both because of the scarcity of time . . . the time can only be occupied in one way.
Factors of Production
, or factor resources. The factors are
land, labor, capital , and entrepreneurship
.

(1)
Land
- refers to all natural resources used to produce goods & services.
oil
fertile land for farming
(3) Capital
- any human effort used to produce other goods or services. There are 2 types of capital as . . .
(3a) Physical Capital
(capital goods) - human made objects that will produce services more efficiently
tools
buildings
(3b) Human Capital
- people investing in themselves to become better at their jobs
training
school
Look at these jobs that we've already discussed.

Which ones require the most manual labor? Rank them from hardest to easiest regarding labor
.
Which one requires the most human capital? Rank them in order from most to least human capital.
Which one do person do you think will get paid the most during their lifetime? Why?
The SECOND factor of production is
labor
.

(2)
Labor

- any effort for which a person is paid. Such as . . .
medical aid
fisherman
garbage collecto
r
factory worker
The THIRD factor of production is capital.
wind and other resources
water
Entrepreneurship is the 4th factor of production.
Lets look at production factors for popcorn
Land
is needed to grow the corn
Labor
and
capital
are needed to harvest the corn, to package it, sell it, and to pop the corn.
capital
and
labor
are needed to prepare and served the popcorn.
Is this a need?
Does this person have different needs than you? Explain.
Today we will begin our introduction into the foreign language of Economics. Words such as peak, shortage, need, and demand don't necessarily have the same meaning as they do in everyday English.
Entrepreneurship
is needed to start the business in the first place.
There are 2 types of
consumer goods:
Durable goods
that last for a long time (refrigerators, cars, stereos, etc.). Durable goods are typically characterized by long interpurchase times - the time between two successive purchases.
Non-durable goods
that last a short time (food, light bulbs, running shoes). A non-durable good is defined as a product that lasts 3 years or less.
Capital goods
are goods used in the production of other goods, rather than purchased by consumers.
You can also apply the concept of scarcity to in Houston, Texas in 2016. You go first . . . Please tell me some things that are limited in supply, even though they have high demand?
Now it's my turn . . . There is a scarcity level of attractive people.
Full transcript