Transcript File - Positively Learning with Mrs. Bales

Economics
8.4.1
The Fundamental Economic Problem
There is not enough to go
around…resources are limited.
Economics- the study of how we make
decisions in a world where resources are
limited.
Scarcity
Needs- things required for survival
Examples?
Wants- things we would like to have to
make life more comfortable & enjoyable
Examples?
Scarcity- when we don’t have enough
resources to have all of the things we
would like to have.
Making Economic Decisions
Because of scarcity, we have to make
some decisions about how to use our
resources.
How do you make a decision?
Trade-offs
Trade-off- the alternative you face if you
decide to do one thing rather than another.
Examples:
taking more time to study means less time to talk to
friends, and spending more time talking to friends
means less time to study.
If the government spends more money on education
it means less if available for medical research, etc.
Opportunity Cost
What is the cost of going to college?
Not just books, tuition, etc.
Also the full-time income you are not earning
because you are studying & going to class
Opportunity cost- the cost of the next best
use of your time or money when you
choose to do one thing over another.
can be more than just money (time,
inconvenience, possible discomforts)
Your role as a consumer.
Consumer- a person who buys or uses a
product.
Choices for consumers
Pay with cash
Credit- get the product now, pay later (credit card,
charge account, water, gas, electricity)
Use a check or debit cards (money comes directly
from your bank account)
Budget
Budget- a plan for making and spending
money
Balanced budget- income is equal or
greater than spending.
Video
Saving
Reasons for saving
Major purchases (home, car, etc.)
Emergencies
It helps the economy by providing money for
others to invest and spend.
It allows businesses to expand by borrowing the
money you’re saving.
You can earn interest- payment for loaning
someone your money.
Rule of 72
This formula can help you determine how
many years it will take for your money to
double.
72
= years to double investment
interest rate
72
= interest rate needed
years to double
Demand

Demand- desire,
willingness and
ability to buy a good
or service

let’s make a demand
schedule
Cost of the # you are
pack of gum willing to
buy
$.50
$1.00
$1.50
$2.00
$2.50
Demand

The demand schedule can be made into a
demand curve.
Demand Curve
Video Games
$50
$
$50
#
100
$40
$30
$20
150
180
230
$10
$5
300
400
$40
Price
$30
$20
$10
$0
50 100 150 200 250 300 350 400
Quantity
Law of Demand

Law of Demand- the quantity
demanded and price move in opposite
directions


If the price is high,…?
If the price is low,…?
Factors affecting demand
1.
2.
3.
4.
5.
Changes
Changes
Changes
Changes
Changes
coffee/tea)
6.
in
in
in
in
in
the number of consumers
consumers’ income
consumers’ tastes
consumers’ expectations
substitutes (pen/pencil, butter/margarine,
Changes in complements (computers/software,
cars/gasoline)
Supply

The amount of a good
or service producers
are willing to sell.

Let’s make a supply
schedule
Cost of Pizza
by the slice
$1
$2
$3
$4
$5
# you are
willing to sell
Supply

The supply schedule can be made into a
supply curve.
Supply Curve
Video Games
$50
$
#
$50
275
$40
225
$30
180
$20
105
$10
55
$5
30
$40
Price
$30
$20
$10
$0
0
50
100
150
200
Quantity
250
300
Law of Supply

Law of Supply- Suppliers will normally offer
more for sale at higher prices and less at
lower prices.


If the price is high….
If the price is low…
Factors affecting supply
1.
2.
3.
4.
5.
Changes in cost of resources.
Changes in productivity. (worker efficiency)
Changes in technology. (can cut costs)
Changes in government policies, taxes &
subsidies
Expectations of producers. ( predicting consumer behavior)
Combining Supply & Demand
The supply & demand curves can be
combined to find the best selling price.
Video Games
$50
$
#
#
demanded
supplied
$50
$40
100
150
275
225
$30
$20
$10
180
230
300
180
105
55
$5
400
30
$40
$30
Price
$20
$10
$0
0
100
200
300
Quantity
400
Equilibrium price- the price at which
supply & demand are equal
What is the
equilibrium
price for video
games?
$50
$40
$30
Price
$20
$10
$0
0
100
200
300
Quantity
400
Surplus- the amount of supply for which
there is no demand; extra (when supply is
greater than demand)
At what
price/s is
there a
surplus of
video
games?
$50
$40
$30
Price
$20
$10
$0
0
100
200
300
Quantity
400
Shortage- when supply cannot meet the
demand; not enough (when supply is less
than demand)
At which
price/s is there
a shortage of
video games?
$50
$40
$30
Price
$20
$10
$0
0
100
200
300
Quantity
400
WHAT CAN WE LEARN FROM TOYS?
HULA HOOPS & SILLY BANDZ
INTRO TO THE HULA HOOP
In 1958, Wham-O, Inc. began marketing the Hula Hoop in the
United States. Sales of the Hula Hoops sky-rocketed during
the year, in the first months over 25 million were sold, within
the year over 100 million. Similarly today, Silly Bandz has
taken off in sales since the summer of 2008. According to
Robert J. Croak, founder of Brainchild Product the producer of
Silly Bandz, from a small warehouse in Toledo, Ohio has gone
from shipping 20 to 1,500 boxes a day.
In 1994, the film The Hudsucker Proxy portrays a fictionalized
account of the demand for Hula Hoops as they were
introduced into the market.
DISCUSSION QUESTIONS
Why does a business owner lower the price of
products that are not selling quickly?
When would a business owner have the incentive to
raise prices?
What does a higher price than before for a good or
service communicate to consumers about the
demand for that product?
INTRO TO SILLY BANDZ
Today, Brainchild Products, the makers of Silly
Bandz are experiencing a large increase in
demand for their products similar to that of Hula
Hoops in 1958. The rise in demand for Silly
Bandz; however, has not as yet been
accompanied by a rise in the price for the
product. Instead producers of Silly Bandz have
responded by largely increasing their production
of Silly Bandz.
DISCUSSION QUESTIONS
What information is being communicated to the
business owner by the $5 price of Silly Bandz?
What can the business owner do to ensure that
the Silly Bandz are allocated to those consumers,
which value them the most?