Fundamental Economic Concepts
If the World Were a Village
of 100 People
Your Task…
Identify 2 aspects of the reading
that you found interesting or
important.
Scarcity Activity
 Within Groups…
 Build a 3-D structure using only resources
provided


20 3x5 index cards
15 paper clips
 Objective


Hold 25 lbs. or more
Structure must cover an area approximately 5
inches
 Scarcity is:
Scarcity
 infinite human needs
and wants in a world
with finite resources.
 What causes it?
 Limited Global
Resources
Want vs. Need
 What is a Need?
 basic requirement for survival
 Examples include: food, clothing, and
shelter.
 What is a want?
 Something that is not as necessary for
survival.
 Examples include: Mountain Dew, Reds
Merchandise, PS3, etc.
Water Scarcity Response
In a minimum of 5 sentences answer the following
question…
Do you believe water scarcity should be a major
priority of the entire world? Why or Why not?
What do you think could be/should be done in regards
to water scarcity?

Keep in mind..
 Possible conflict
 Change in climate
 Infrastructure
 Co$t
 Population
TINSTAAFL
There is no such
thing as a free
lunch…
What does that
mean?
Do you agree? Why
or why not?
Four Basic Economic Questions
What to produce?
• What is the product that will be
made?
2. How to produce?
• Made by machines, people,
etc.?
3. For whom to produce?
• Everyone – food, some people –
diapers
4. How much for now, how much
for later?
• Suntan lotion – need more in
summer months
1.
Factors of Production
Land
1.
•
All things found in nature –water, wood, natural
resources
Labor
2.
•
Workers that produce the products
Capital
3.
•
$ -- needed to buy resources and pay for labor
4. Entrepreneurs
•
People who own businesses and take on risk
Factors of Production
 What four factors of production are necessary to bring
a shirt to consumers?
Within Groups…
 Complete Clown Face
 Directions






Color the clown hat and blue
Color the clown nose red
Color the clown hair yellow
Color the clown flower green
Color the clown mouth yellow and orange
Cut out the clown
Division of Labor and Specialization
 Productivity:
 The measure of the amount of output produced by
a given amount of inputs in a specific time period.
 Division of Labor:
 Work is arranged so that individual workers do
fewer tasks than before
 Specialization:
 Expert in one specific field
 Why would a business become more
productive by having a division of labor and
specialization?
Opportunity Cost
 What is the true cost of any given
product?
 Opportunity cost is:
 1. Cost of the next best alternative use of
money, time, and resources
 2. One choice over another
 3. Trade off- alternative choice
 4. What you give up
Opportunity Cost
Cost benefit Analysis
compares….
 What you get for
your choice
 What you give-up
for your choice
Opportunity Cost
 The cost of the next best alternative. What
are you giving up instead?
 What do you think the true cost of college is?
 Hint: What are all the costs associated with
college?
 What are you giving up by attending college?
Opportunity Cost
What Are You Giving Up?
Hybrid
Storage
Towing
Capacity
SUV
$ For Gas
Easy To
Park
Opportunity Cost v.
Incentive
Opportunity Cost:
What you give-up when you
make a choice
Incentives:
What you may get for making
a choice
Production Possibilities Frontier
Over Production of
Economy
(Unattainable)
Full Production of Economy
(Efficient)
Under Production
of Economy
(Inefficient)
7 Major Economic Goals of the
U.S.
1. Create Stability
2. Full Employment
3. Economic Efficiency
4. Price Level Stability
5. Economic Freedom
6. Equitable distribution of income
7. Balance of trade
Economic Goals & Economic Freedom
 What do you think the nation’s economic goals should
be????
 How do we get to points A and B on the graph?!?
7 Major Economic Goals of the U.S.
 The economic goal of PRICE LEVEL STABILITY
is illustrated in the economy by gas prices/ oil..
What are some conflicts between these goals?
 Full employment vs. lack of jobs
 Run out of resources
Look at page 47, which of the goals does each
characteristic represent??
 Economic freedom
 Income
 Exchange
Goals and Freedoms
 Role of Government:
 Protector, provider of goods and services,
consumer, etc.
 Role of Consumer:
 Control production of goods
 Role of Entrepreneur:
 Organizes and manages land, capital and
labor
 Start up businesses
Communism v. Capitalism
(Command v. Market)
Marx: Communist Manifesto
Smith: Wealth of Nations
 On ½ sheet; create Command and Market T-Chart
 Identify 3 things you know about Communism and 5 things
you know about Capitalism
Economic Systems (2 examples of Each)
Advantages
Disadvantages
Traditional
Pg. 40
-Ensures Survival
-Little disagreement
over economic goals
-
Command
Pg. 46
-Provide for all citizens
-100% employment,
shelter & medical care
in theory
-Don’t understand local
needs
-Little incentives (no choice)
-No private property or
wealth
Market
Pg. 54 & 55
-Many choices
-Follow own interests
-Free Governments
-Profit & incentives
-Limited support for the
community
-Unequal distribution of
wealth
-Boom & Bust
Resist Change
Less Productive
Not doing job you want
Low standard of living
Problem
Market
Command
Traditional
1.
Unemployment
in Society
Chances of
Unemployment
Goal of 100%
Employment
Everyone had
role in economy
2.
Health Care
Private &
Government
provided. Some
without
Government
Controlled. All
covered
Noninstitutionalized
Democratic
Process
Dictatorship
Tribal Based;
Birthright,
Gender
Supported by
economic
system
Limited to no
individual
choice
Few because of
specific roles in
economy
3.
Selection of
Government
Leader
4.
Individual Rights
Problem
5.
Personal
Property
6.
Big Business
7. Small Family
Business
8.
Government
Regulation
Market
Command
Traditional
Individual
Ownership
Government
Ownership
Property of
Tribe or Group
Privately owned,
produce what
consumers want
Government
Owned,
Produce what's
needed
Non- Existent
Private
Ownership
Surplus is
shared with
government
Surplus used to
trade or barter
Limited
Government
Involvement
Government
controls entire
economy
Promotes
necessities for
survival
Problem
Market
Command
Traditional
9.
Housing
Choice to buy
or rent/
Homelessness
Government
provided; no
say
With extended
family / tribe
10.
Old Age /
Retirement
Individual
Savings/
Government
(Social Sec.)
Government
Supported
Continue to
Work
What Do These Logo’s Have
in Common?
Mergers
 Combination of Multiple Companies into 1
 What are 2 Types of Mergers?
 Conglomerate
 Multinationals Corporation
 How do they improve efficiency:
 Do not duplicate services
 Conglomerate:
 When 2 or more companies in different industries
merge
 What us one main reasons for conglomerate
mergers?:
 Companies to diversify & expand into new industries
Mergers continued…
Multinational
 Large corporation that branches over
several countries
Why are multinationals important?
 Provide Jobs
 Goods & Services
 Spread Technology
 Raise living standards in poor nations
•How does this diagram represent a conglomerate?
•How does this represent diversification?
Sole Proprietorship
 Characteristics:
 Business owned by the individual, who makes
all business decisions and receives all the
profits.
 Advantages:
 Easy to start up, make all decisions by yourself,
only taxed once
 Disadvantages:
 Unlimited liability
 Hard to raise $$
 Example:
 Ted’s
Partnership
 Characteristics:
 Two or more individuals, same as sole-
proprietorship
 Advantages:
 More people to share responsibilities
 Disadvantages:
 Liability
 Responsible for actions of partners
 Example:
 Premier Sound
Corporations
 Characteristic:
 Legal entity that can conduct business in its own
name, owned by stockholders
 Advantages:
 Owners have limited liability
 Can exist even if an owner dies
 Disadvantages:
 Double Taxation
 Hard to set up
 Examples:
 Pepsi, Coke, Kraft, GM, Ford, most major
companies
Recap:
 What are the three economic systems?
 Traditional, Command, Market
 What are the advantages of a command economy?
 Little unemployment
 What is an example of a conglomerate?
 Walt Disney
 An Example of a Multinational…
 Apple
Quick Review
 What is Scarcity?
 infinite human needs and wants in a world with finite resources.
 What are the four basic Econ. Questions?
1. How much for now, how much for later?
2. For whom to produce?
3. How to produce?
4. What to produce?
 All visuals taken from Google images