Scarcity Showdown
What does scarcity mean in economics?
What does scarcity mean in economics?
A coffee shop gives customers a free drink after they buy 10 drinks.
What economic concept is the free drink?
An incentive.
A commercial oven used by a bakery is which factor of production?
Capital.
Businesses decide what to sell largely based on prices, competition, and what consumers buy.
Which economic system does this MOST closely describe?
Market economy.
TRUE OR FALSE:
Money is always considered capital when discussing the factors of production.
False.
Capital means productive tools, machinery, equipment, and buildings, not simply money.
You have $25. You can go to a movie, eat dinner with friends, or save the money.
You choose the movie. Dinner with friends was your next-best choice.
What is your opportunity cost?
Dinner with friends.
What does “marginal” mean in marginal cost and marginal benefit?
Additional, or one more.
Name the FOUR factors of production.
Land
Labor
Capital
Entrepreneurship
Government planners make most major decisions about what goods are produced and how resources are used.
Which economic system?
Command economy.
A student says:
“My marginal benefit is all the enjoyment I have received from eating four slices of pizza.”
What is the mistake?
Marginal benefit means the ADDITIONAL benefit from one more slice, not the total benefit from all four slices.
What is the difference between a trade-off and an opportunity cost?
Trade-offs are all the alternatives given up.
Opportunity cost is the single next-best alternative given up.
Producing ONE more item creates a marginal benefit of $50 and a marginal cost of $35.
Based only on this information, should the business produce it? Why?
Yes.
Marginal benefit ($50) is greater than marginal cost ($35).
A clothing company replaces some workers with automated machines.
Which of the three economic questions is the company answering?
HOW to produce.
Private businesses make many economic decisions, but government also regulates businesses, collects taxes, and provides public services.
Which economic system?
Mixed economy.
A festival has 20 spaces for food vendors but 80 businesses want one.
The spaces are auctioned to the businesses willing to pay the most.
Which economic approach is being used most heavily?
A festival has 20 spaces for food vendors but 80 businesses want one.
The spaces are auctioned to the businesses willing to pay the most.
Which economic approach is being used most heavily?
A city owns one empty lot. It could build affordable housing, a park, or a shopping center, but it can only choose one.
What economic problem forces the city to choose?
Scarcity. The city has limited land but multiple competing uses for it.
A restaurant can stay open ONE extra hour.
Additional revenue: $300
Worker wages: $140
Food: $80
Electricity and cleaning: $30
What are the marginal benefit and marginal cost? Should it stay open?
Marginal benefit = $300
Marginal cost = $250
Yes, based on the information given, because MB > MC by $50.
A company produces inexpensive sneakers mainly for teenagers who want affordable shoes.
Which economic question is answered by “teenagers who want affordable shoes”?
FOR WHOM to produce.
Families continue producing goods using methods and customs passed down for generations.
Which economic system does this MOST closely represent?
Traditional economy.
A clothing company:
• Uses automated machines instead of more workers
• Uses less expensive materials
• Sells inexpensive clothes mainly to budget-conscious teenagers
Identify HOW to produce and FOR WHOM to produce.
HOW: Using automated machines and less expensive materials.
FOR WHOM: Budget-conscious teenagers.
A student says, “Economics is basically the study of money.”
What is wrong with this statement?
Economics is broader than money. It studies how people and societies make choices when resources are limited.
A delivery company gives workers $20 extra for every 10 packages delivered.
Deliveries increase, but damaged packages and customer complaints also increase.
What behavior did the incentive successfully encourage, and what problem did it create?
It encouraged workers to deliver more packages.
It also encouraged rushing, which contributed to more damaged packages and complaints.
A woman starts a food truck, chooses the menu, purchases equipment, hires workers, and risks her own money.
Which factor of production BEST describes her role, and why?
Entrepreneurship.
She organizes the other resources, makes business decisions, and takes financial risk.
Why would it be inaccurate to describe the United States as a PURE market economy?
Because the United States is a mixed economy.
Markets and private businesses make many decisions, but government also regulates, taxes, provides services, and influences economic activity.
A city has $20 million and one piece of vacant land.
It chooses affordable housing instead of a shopping center. The shopping center was its next-best choice.
Identify:
1. The scarcity
2. One trade-off
3. The opportunity cost
A city has $20 million and one piece of vacant land.
It chooses affordable housing instead of a shopping center. The shopping center was its next-best choice.
Identify:
1. The scarcity
2. One trade-off
3. The opportunity cost