Transcript File - West Meck High School Civics and Economics

UNIT 7:
MICROECONOMICS
Warm-Up
◦ One positive contribution of the Articles of
Confederation was the creation of the
Northwest Ordinance of 1787, which
provided for which of the following?
◦ a. Resolved the problem of
representation between the large and
small states
◦ b. Established an orderly procedure for
creating new states
◦ c. Addressed the problem of slavery in
the northern states
◦ d. Settled the boundary between the
northwestern states and Canada.
◦ Which act was a direct result of the
Boston Tea Party?
◦ a. Intolerable Acts
◦ b. Navigation Acts
◦ c. Tea Acts
◦ d. Townshend Acts
INTRO TO ECON
EQ: What are the 3 questions of economics?
What is Economics?
Economics: the study of how people seek to satisfy their
needs and wants by making choices
Needs- something necessary for survival
ex: air, food, water, shelter
Want: an item we desire but that is not essential to
survival
Scarcity
Goods: physical objects such as shoes and shirts
Services: actions or activities that one person performs for another (ex: haircuts, tutoring,
dental checkups, etc)
Why do we have to make these choices???? SCARCITY!!!!
Scarcity: limited resources to meet unlimited wants
All goods and services we produce are scarce!!!!!!
So…. What creates scarcity? Why
can’t we all just share?
Scarcity always exists because our needs and wants are
always greater than our resource supply.
Goods and services are scarce because they are all made
from resources that are scarce.
GOAL OF ECONOMICS: solving the problem of scarcity
Opportunity Cost
• Trade offs - everything you give up when you make your
decision.
• Opportunity cost - the NEXT BEST thing you give up. The
opportunity you pass up to get what you chose.
• Monetary Cost - The $$ amount of whatever you choose.
Scenario 1
Melissa is going to work this weekend,
instead of hanging out with her
boyfriend. She could also have gone to
lunch with her mom or shopping with
her dad.
Scenario 2
The Adams family buys a computer for
$1,899 instead of going to Disney world
on vacation. They also could have put
the money in Wendy’s college fund or
for a down payment on a new car.
Scenario 3
• Mr. S bought a new bedroom set for
$2000 instead of going on a cruise with
his wife. He could have also used that
money to buy a flat screen TV or put it
into a savings account.
Scenario 4
Matt decided to study Friday night for
his exam on Monday rather than go out
with his friends to the movies. He could
have also gone to the basketball game
or stayed home and play board games
with his family.
Reflection
What is an example of the problem of scarcity in your life? How do you attempt to solve
that problem?
Freakonomic Discussion
Do names matter?
Should we bow to societal pressure?
Does cheating matter?
Can you bribe high school students to pass their classes? Why or why not?
Exit Ticket
◦ Which of the following is one of the
main functions of money?
A. to allow stockholders to make
earnings
◦ The study of how firms, nations, and
individuals best allocate their limited
resources is called what?
◦ A. Circular Economic Activity
B. to compare the values of goods and
services
◦ B. Economics
C. to ensure the government collects it
revenues
◦ D. Supply and Demand Analysis
D. to secure the funds necessary for
military expenditures
◦ C. Factoring Production
Warm-Up
◦ Which of the following is NOT a true
statement about the power of Congress
under the Articles of Confederation?
◦ a. Congress was unable to regulate
trade.
◦ b. Congress could not pass laws without
the approval of nine states.
◦ c. Congress collected taxes four times a
year.
◦ d. Congress had difficulty enforcing its
laws.
◦ Which of the following would most likely
be considered an Anti-Federalist
argument?
◦ a. The Constitution gives the national
government too much power, and it limits
both the state’s and individuals’ rights.
◦ b. The creation of an executive leader will
lead the country back to a monarchy.
◦ c. A Bill of Rights is not needed because
the powers of the national government
are already limited through the
separation of powers.
◦ d. The Articles of Confederation do not
need to be modified, the republic is good
the way it is.
TYPES OF COSTS
AND FACTORS OF
PRODUCTION
EQ: How does scarcity affect decision making?
Three Essential Economic
Questions
WHAT to produce?
HOW to produce?
FOR WHOM to produce?
Types of Cost
Fixed cost: does not change when production
changes
Ex: rent, salary, cost of building,
Variable cost: changes when the level of
production changes
Ex: worker wages, electricity bill, inputs
Total cost = Fixed cost + Variable cost
Marginal Cost
The cost of producing an additional unit of
output.
Example- If you make jeans, it’s the cost of
producing one extra pair of jeans.
Production Possibility Frontier
PPF is a …graph showing all the possible ways we could choose to distribute our
resources in production.
PPF
Four Factors of Production
There are four factors that are included in any product.
➔Land
➔Labor
➔Capital
➔Entrepreneurship
Land
Materials that are NATURALLY MADE and transformed into something
else
Examples:
▪Oil
▪Timber
▪Land
▪Crops
▪Natural gas
▪Milk
Land Cont.
RENEWABLE
Can be replaced or renewed or recycled
ex. wood, water, crops
NON-RENEWABLE
Once used, resource is
gone
ex: Oil, Natural Gas, Gold
Labor
PEOPLE who work to produce a good or service
Example:
Construction worker
Teacher
Cook
Capital
Something used to help make other goods
2 types of capital
Physical capital
Human capital
Physical Capital
MAN MADE tools that help make something else
Examples:
Hammer
Robot
Book
Computer
Human Capital
Adding education or training to a laborer so he/she is more productive
Entrepreneurship
People who RISK time and money ($) to start their own business
Examples:
P. Diddy
Ben & Jerry’s
Little girl selling Lemonade
Donald Trump
Reflection
How does Factors of Production influence price?
Exit Ticket
◦ What is a trade-off?
A. the process of giving up one desire in
order to satisfy another desire
B. the value of the next best thing we give
up in order to do or get something else
C. the wealth we are given by nature
D. the idea of making the biggest profit as
possible
◦ What is an example of ‘human capital’
at West Meck High School?
A. Teachers participating in a classroom
management workshop
B. New mobile classrooms out by the
baseball field.
C. Substitute teachers
D. Free and reduced lunches to students
who qualify.
Warm-Up
◦ The creation of the U.S. Senate was a
reflection of the ideas presented in
which plan?
◦ a. Virginia Plan
◦ b. Albany Plan
◦ c. New Jersey Plan
◦ d. Connecticut Plan
◦ Which of the following officials is in line
for the presidency if anything should
happen to the acting president and
vice president?
◦ a. the Secretary of State
◦ b. the national security advisor
◦ c. the Senate minority leader
◦ d. the Speaker of the House
DEMAND
EQ: What effect does demand have on price?
Complementary v. Substitute
Goods
•Complementary Good: Two goods
that are usually consumed together
(Hot Dogs & buns)
•Substitute Good: An acceptable
replacement for a good (Playstation
& Xbox)
Demand
•Demand – Consumer’s willingness to buy an item at
various prices.
•Law of Demand – Consumers will buy more of a product
when prices are low, and less when prices are high.
–P (price) goes up
–Q (quantity demanded) goes down
•Quantity Demanded – How much a consumer will buy at a
specific price.
People’s Income Increases
Effect on Demand
•Demand Increases
–(shift right)
Population Increases
Effect on Demand
•More people will want the good.
•Demand Increases
–(shift right)
Future Expectation Change
Effect on Demand
•Headlines read “electronics prices will rise next
month” … people want to buy NOW before
prices go up.
•Demand Increases
–(shift right)
Change in Style
Effect on Demand
•Baggy jeans are less popular now. More people
buy skinny jeans.
•Demand (for skinny jeans) increases
–(shift right)
Change in the Weather
Effect on Demand
•Summer is cold and rainy, so fewer
people buy bathing suits.
•Demand Decreases
–(shift left)
Price of Complementary Good
Changes
Effect on Demand
•Peanut butter is on sale, so more people
buy jelly too.
•Demand Increases
–(shift right)
Price of Substitute Good
Changes
Effect on Demand
•Coke goes on sale, so fewer people buy
Pepsi.
•Demand Decreases
–(shift left)
Scenario Practice
•Harris Teeter is advertising a sale on hot dog
buns. What is the impact on the demand for hot
dogs?
•Playstation 3, the newest video game console,
hits stores. What is the impact on the demand
for Xbox 360?
•The weatherman forecasts rain for the weekend
in Charlotte. What is the impact on the demand
for umbrellas?
•The N.C. General Assembly increases minimum
wage to $7/hour. What is the impact on the
demand for clothing?
•The price of MP3 players decreases dramatically
due to new technology. What is the impact on
the demand for portable CD players?
•The price of hamburgers increases at Food Lion.
What is the impact on the demand for French
fries?
Reflection
How do changes in demand affect price? How could a business influence demand?
Answer in a paragraph or two.
Exit Ticket
◦ If two goods are substitutes for each
other, then consumers usually decide to
purchase one or the other on the basis of
what?
◦
A. The prices of the two goods
B. Where the two goods have been
produced
C. Their desire to have variety in what they
consume
D. Their desire to keep the producers of both
goods in business
◦ “EARLY COLD WAVE DESTROYS FLORIDA
ORANGE CROP!”
◦ What is the most likely result of the
situation described in the headline
above?
◦
A. The government will limit consumer use
of oranges
B. Supermarkets will import fewer oranges
C. The price of oranges will remain stable
because of decreased consumption
D. The price of oranges will rise
Warm-Up
◦ All of the following are examples of the
Congress’ non-legislative powers
EXCEPT
◦ a. the power to impeach public
officials
◦ b. the power to approve treaties
◦ c the power to admit new states to the
Union
◦ d. the power to establish rules
governing the armed forces
◦ The executive branch of the federal
government bears responsibility for all
of the following except which of these
practices?
◦ a. developing rules to put new laws
into effect
◦ b. administering the federal
government’s services
◦ c. providing assistance to foreign
diplomats
◦ d. regulating various organizations’
activities
SUPPLY
EQ: What effect does supply have on price?
Elasticity
Inelastic demand – changes in price only affect Quantity Demanded (Qd) a little bit.
Usually NEEDS that have no good substitute.
Examples: gas, cigarettes,
If gas prices go up, people might buy less gas, but they’ll still buy it.
Elastic demand – changes in price have a big impact on Quantity Demanded (Qd)
Usually WANTS, things w/ good substitutes
ex – If soda prices go up, people might buy juice or iced tea instead.
Supply
❖ Supply – the quantities of goods or services that producers
are willing to sell at all possible market prices.
❖ Quantity Supplied – The total amount or a good or service
produced at a specific price.
❖ Law of Supply – As price rises for a good the quantity
supplied rises. As the price falls quantity supplied also falls.
LAW OF SUPPLY
P Qs
OR
P Qs
Cost of Input Decreases
❖ It’s cheaper to make the good, so people make
more.
Effect on Supply
❖ Supply Increases
(shift right)
Number of Suppliers Increases
❖ More
OF it
people are making the good, so there’s more
Effect on Supply
❖ Supply Increases
(shift right)
Bad Weather for Product
❖ Product depends on weather (crops).
Effect on Supply
❖ Supply Decreases
(shift left)
Practice
❖ Dick’s Sporting Goods goes out of business.
What is the impact on basketballs in Charlotte?
❖ A hurricane destroys the orange groves in
Florida. What is the impact on the supply of
Orange Juice?
❖ The price of gas decreases. What is the impact
of trucking companies?
❖ Nik moves their factory from the U.S. to China
where workers are paid less. What is the
impact on the supply of Nike’s shoes?
Reflection
How do changes in supply impact the price of a good or service?
Exit Ticket
◦ What refers to the various quantities of
a good or service that producers are
willing to sell at all possible market
prices?
A. Demand
B. Supply
C. Subsidy
D. Surplus
◦ Which states the law of supply and
demand correctly?
A. An oil shortage pushes up the cost of
gasoline
B. Concern for the environment leads to
an increase in carpooling
C. More thefts lead to higher automobile
insurance premiums
D. Slow sales cause General Motors to
increase luxury car prices
Warm-Up
◦ Which power does the Governor have
that the President does not have?
◦ a. Pardon
◦ b. Line-item veto
◦ c. Over-ride
◦ d. Budget proposal
◦ According to the North Carolina
Constitution, how is the General
Assembly organized?
◦ a. Unicameral legislative body with
representation based on population
◦ b. Bicameral legislature with a Senate
and a House of Representatives
◦ c. Bicameral legislature with a House of
Burgesses and a Parliament
◦ d. Unicameral legislative body with
representatives chosen by the
Governor
EQUILIBRIUM
EQ: What is equilibrium?
A Fully labeled Supply & Demand
Graph
S1
P
Equilibrium
Point
E1
P1
Market
Clearing
Price
D1
Q1
Q
A bad winter causes many orange trees to die… what
happens?
Orange Juice
PRICE ____
S2
S1
P
E2
QUANTITY____
P2
E1
P1
BECAUSE OF A
CHANGE IN
SUPPLY
D1
Q2
Q1
Q
Pepsi goes on sale. What happens to Coke?
Coca-Cola
PRICE ____
S1
P
QUANTITY____
E1
P1
BECAUSE OF A
CHANGE IN
E2
P2
DEMAND
D2
Q2
Q1
D1
Q
Playstations go on sale. What happens to video games?
Video Games
PRICE ____
S1
P
E2
QUANTITY____
P2
E1
P1
BECAUSE OF A
CHANGE IN
DEMAND
D1
Q1
Q2
Q
D2
This year the cotton crop produced more than expected.
What happens to clothing?
Clothing
PRICE ____
S1
P
S2
QUANTITY____
E1
P1
BECAUSE OF A
CHANGE IN
E2
P2
SUPPLY
D1
Q1
Q2
Q
Scenario #1
Weather this season has been
perfect for apples, so an
unexpected crop is sent to
local supermarkets. What is
the impact on Apple sales?
Shortage
• When more is
demanded than
supplied
S1
P
E1
• In other words…
Price is too low!
P1
D1
Q
QS
QD
Surplus
• When more is
supplied than
demanded
S1
P
P1
E1
• In other words…
Price is too high!
D1
QD
QS
Q
Price Ceiling
a) An artificial barrier
that keeps the price
from reaching the
market clearing
price
– Ex: price cap (gas)
S1
P
E1
MCP
Price Ceiling
b) creates shortage
D1
Q
Price Floor
a) An artificial barrier
that keeps the price
from falling to the
market clearing
price
– Ex: minimum wage
S1
P
Price Floor
E1
MCP
b) creates surplus
D1
Q
Exit Ticket
◦ What is the point where supply and
demand achieves balance known as?
◦ What states that suppliers will normally
offer more for sale at higher prices and
less at lower prices?
A. Market economy
B. Consumer shortage
A. Law of Demand
C. Equilibrium price
B. Law of Supply
C. Law of Diminishing Utility
D. Law of Marginal Utility