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Me on the first “Pink Thursday” Me on the first “Pink Thursday”

Review • What is definition of Economics • What are needs • What is Review • What is definition of Economics • What are needs • What is the difference between universal and nonuniversal needs • What are wants • What is difference between Micro and Macro economics? • What is the difference between scarcity and shortage? • What is basic economic truth?

The Toilet Crisis • What is the nature of the toilet crisis in the The Toilet Crisis • What is the nature of the toilet crisis in the third world? • What are some of the results of this crisis? • What were facts cited in this video? • What is being done to address this issue?

New Key Terms • Trade offs: All the possible choices or options sacrificed when New Key Terms • Trade offs: All the possible choices or options sacrificed when a choice is made • Opportunity Cost: The next best alternative sacrificed when a choice is made • Guns or Butter: The choice that the government makes between allocating scarce resources to satisfying either the military or the non-military needs and wants of our society (nation).

Additional key terms • Standard of Living: A measure of how well a society Additional key terms • Standard of Living: A measure of how well a society satisfies the needs and wants of its people. • GDP: The value of all the products (goods and services) produced in a nation. • Per-capita GDP: A measurement determined by the GDP of a nation divided by its population. • Sunk Costs: Cost which have already been incurred.

The Road Not Taken” by Robert Frost Every choice has a cost because choosing The Road Not Taken” by Robert Frost Every choice has a cost because choosing to do one thing means giving up the opportunity to do something else.

We recognize that… • Faced with the same option, different people often make different We recognize that… • Faced with the same option, different people often make different choices because they put different values on each alternative’ s costs and expected outcomes

What are tradeoffs? • Think of all the choices that you had with regards What are tradeoffs? • Think of all the choices that you had with regards to eating breakfast this morning.

OR… • Think of all the items you could buy with $50 at the OR… • Think of all the items you could buy with $50 at the mall this afternoon

OR… • Think of all the choices of what you could be doing if OR… • Think of all the choices of what you could be doing if you were not in this classroom right now?

Trade offs • Tradeoffs are all the REALISTIC choices that we have when allocating Trade offs • Tradeoffs are all the REALISTIC choices that we have when allocating scarce resources such as our time or money

Opportunity cost and trade offs Opportunity cost and trade offs

Brad had to pick between two different women • Actually he had millions of Brad had to pick between two different women • Actually he had millions of women to choose from but it came down to just these two

His choice His choice

Lopez’s Choice Lopez’s Choice

Difficult Choice…. Difficult Choice….

Trade Offs • Think about the alternatives of how you could spend $100 at Trade Offs • Think about the alternatives of how you could spend $100 at the mall • The way the government could use $1, 000 • The options we have in Brentwood for eating “junk food”

Opportunity cost • You decide to go shopping with your friends this weekend. Opportunity cost • You decide to go shopping with your friends this weekend.

At the mall you go to your favorite store At the mall you go to your favorite store

Where your boyfriend used to work Where your boyfriend used to work

You need to buy him cologne as a gift and you narrow it down You need to buy him cologne as a gift and you narrow it down to either…

“Fierce” “Fierce”

Or “Proof” Or “Proof”

You decide to get the “Fierce” You decide to get the “Fierce”

What was the opportunity cost of your decision? • The “Proof” What was the opportunity cost of your decision? • The “Proof”

You decide to continue shopping • You still have a few extra $20 s You decide to continue shopping • You still have a few extra $20 s in your purse • You go over to the women’s clothing • After considering all the options (“trade offs) • You settle on one of two polo shirts

A blue shirt to match your eyes A blue shirt to match your eyes

Or a new shirt to wear in Lopez’s class next Thursday Or a new shirt to wear in Lopez’s class next Thursday

• You decide to accept the opportunity cost of the blue shirt so • You decide to accept the opportunity cost of the blue shirt so that you can be more fashionable in Econ Class so you buy the pink polo

Guns versus Butter Guns versus Butter

SUNK COSTS ACTIVITY • Why so difficult to end the war? • Why we SUNK COSTS ACTIVITY • Why so difficult to end the war? • Why we never discontinue government programs? • Why people sometimes stay in bad relationships?

Super Sweet 16 Party Super Sweet 16 Party

Homeland Security • It is the first responsibility of any government to protect its Homeland Security • It is the first responsibility of any government to protect its citizens from enemies both foreign and domestic?

What is the price of this “protection” • Financially • In terms of tolerating What is the price of this “protection” • Financially • In terms of tolerating “certain actions” like “torture” • Racial Profiling? • Civil Rights, like privacy

Special Powers for Pres? • • National Security and Homeland Security Presidential Directive White Special Powers for Pres? • • National Security and Homeland Security Presidential Directive White House News NATIONAL SECURITY PRESIDENTIAL DIRECTIVE/NSPD 51 HOMELAND SECURITY PRESIDENTIAL DIRECTIVE/HSPD-20 Subject: National Continuity Policy Purpose (1) This directive establishes a comprehensive national policy on the continuity of Federal Government structures and operations and a single National Continuity Coordinator responsible for coordinating the development and implementation of Federal continuity policies. This policy establishes "National Essential Functions, " prescribes continuity requirements for all executive departments and agencies, and provides guidance for State, local, territorial, and tribal governments, and private sector organizations in order to ensure a comprehensive and integrated national continuity program that will enhance the credibility of our national security posture and enable a more rapid and effective response to and recovery from a national emergency.

El Principe de Asturias • Spain’s aircraft carrier which carriers twelve Harrier jets and El Principe de Asturias • Spain’s aircraft carrier which carriers twelve Harrier jets and 16 helicopters.

Spraying Strawberries • Jose has a strawberry patch Spraying Strawberries • Jose has a strawberry patch

Spraying Strawberries • Jose owns a small strawberry farm Spraying Strawberries • Jose owns a small strawberry farm

The sale of the strawberries supports his entire family The sale of the strawberries supports his entire family

One day…. • Jose discovers that there are bugs eating his strawberries One day…. • Jose discovers that there are bugs eating his strawberries

He was worried • He picture his little son, Emilio going hungry because they He was worried • He picture his little son, Emilio going hungry because they had no strawberries to sell

He called his friend Paco • Paco had a small plane that he used He called his friend Paco • Paco had a small plane that he used for crop dusting

Paco’s plane was just what Jose needed to save his crop and poor Emilio Paco’s plane was just what Jose needed to save his crop and poor Emilio

Jose offered to fly over the farm and dust the fields • He agreed Jose offered to fly over the farm and dust the fields • He agreed to charge just $50. 00 for each dusting

Jose was once in Mr. Lopez’s Econ Class. • Jose knew that he needed Jose was once in Mr. Lopez’s Econ Class. • Jose knew that he needed to calculate the marginal net benefit for each dusting in order to determine how many times Paco should dust the crops

His objective • Jose wanted to maximize the amount of strawberries saved but he His objective • Jose wanted to maximize the amount of strawberries saved but he did not want to pay more than was necessary • Since he never was truant in Lopez’s class, he knew that at some point the marginal cost would exceed the marginal benefit.

Page 1. 28 • We are going to use the table on page 1. Page 1. 28 • We are going to use the table on page 1. 28 to calculate how many times Jose should have Paco dust the strawberry fields.

Production Possibilities • Remember Opportunity cost? • While there are sometimes many tradeoffs to Production Possibilities • Remember Opportunity cost? • While there are sometimes many tradeoffs to a choice there is always one opportunity cost. • That being the best alternative to the choice we make

If you own a factory • Whatever you choose to produce using the resources If you own a factory • Whatever you choose to produce using the resources of your factory there is always an opportunity cost (best alternative) to this choice.

Lets assume • We have a factory that can produce either Watermelons or Flip Lets assume • We have a factory that can produce either Watermelons or Flip Flops • What are our production possibilities?

First Option • We can produce all watermelons First Option • We can produce all watermelons

Second Option • We can produce all flip flops Second Option • We can produce all flip flops

Third Option • We can produce some combination of both watermelons and flip flops Third Option • We can produce some combination of both watermelons and flip flops

The options again • 50 watermelons and 0 flip flops • 100 flip flops The options again • 50 watermelons and 0 flip flops • 100 flip flops and 0 watermelons • Some combination of both

The combinations • Assume we start are producing 100 flip flops and 0 watermelons. The combinations • Assume we start are producing 100 flip flops and 0 watermelons. • Knowing our maximum potential is for 50 watermelons in lieu of the 100 flip flops, what is the trade off for each watermelon we produce.

Producing Watermelons • So for every watermelon we produce we forgo 2 pairs of Producing Watermelons • So for every watermelon we produce we forgo 2 pairs of flip flops.

Complete the table • Assuming that for every watermelon we produce 2 less pairs Complete the table • Assuming that for every watermelon we produce 2 less pairs of flip flops F Flops Watermelons 100 0 98 1 96 2 94 3 92 4 90 5

Creating a table Flip Flops Watermelons 100 0 98 1 96 2 94 3 Creating a table Flip Flops Watermelons 100 0 98 1 96 2 94 3 92 4 90 5 80 10 60 20 40 30 20 40 0 50

Law of Increasing costs • How many flip flops do we have to forego Law of Increasing costs • How many flip flops do we have to forego to make one watermelon? • Two watermelons? • Three watermelons? • As we increase the production of one item we must give up increasing amounts of a second item

For example… • If you make shoes, it takes more leather to make two For example… • If you make shoes, it takes more leather to make two pairs of shoes than it does to make just one pair. • The more shoes we produce the more leather we require. • Therefore we are giving up increasing quantities of an alternative produce as we increase our production of shoes.

Key terms • • • Factors of Production Land Labor Capital Physical Capital Human Key terms • • • Factors of Production Land Labor Capital Physical Capital Human Capital

Definitions • Factors of Production: Resources used to make all goods and service. • Definitions • Factors of Production: Resources used to make all goods and service. • Land: Natural resources • Labor: Efforts of a person towards a task • Capital: Human made resources • Physical Capital: Buildings and tools • Human Capital: Knowledge, skills, and experience

For example • • • Land: Property on Oak Street, natural gas Labor: Digging For example • • • Land: Property on Oak Street, natural gas Labor: Digging a ditch Capital: Assets of this school Physical Capital: The desks and chairs Human Capital: Knowledge in Mr. Lopez’s brain

Key Terms • Thinking at the Margin: Decision making my units or increments on Key Terms • Thinking at the Margin: Decision making my units or increments on the use of resources. • Marginal benefit: The benefit from the allocation of an additional unit of a resource. • Marginal cost: The cost of allocating an addition unit of an increment. • Law of Diminishing Returns: The tendency of the marginal benefit to diminish as additional units of a resource are allocated.