QOD #2: Wants & Needs A lesson in scarcity & rationing Economic Way of Thinking HW: Read Ch 1:2 - 1:4

Answer ?s @ end of section

Pg 13 #1-7, pg 20 #1-6 & pg 31 #3

AGENDA Thurs 1/7 & Fri 1/8

It is Friday night. Your only chunk of free time all weekend is tonight from 6:00 to 11:00. Before deciding how you will spend this time, consider these factors:

• You have $40 to spend. • You have an economics test on Monday. • This is the last basketball game of the season. • It is your mother’s birthday. • Someone you like has asked you out on a date. • Your favorite band is in town tonight. Fill in a table like the one below showing how you plan to spend your time. Create your own

activities or choose from the list of possible activities. If you choose an activity from the list, use the given time and price.

Basketball game: 3 hours, $5 Dinner: 2 hours, $20 Movie: 2 hours, $10 Rock concert: 4 hours, $40 Study for test: variable time, $0 Hang out at friend’s house: variable time, $0 Work at job: variable time, earn $10 per hour Family time: variable time, $0

TIME ACTIVITY PRICE

6:00 p.m.

7:00 p.m.

8:00 p.m.

9:00 p.m.

10:00 p.m.

1. What decisions did you have to make in this exercise?

2. What constraints did you face when making these decisions?

3. For each decision you made about how to spend your time, what did you have to give up?

As you watch the clip from Titanic, write down examples of scarcity, rationing devices and opportunity costs.

With your partner, discuss the following questions and record your thoughts:

1. What are the scarce goods and how are they rationed among the passengers?

2. As the Titanic begins to sink, how does “life or death” scarcity change the way goods are rationed among passengers?

3. The cruise line chose not to have enough lifeboats for all the passengers. Using your knowledge of the movie, explain the opportunity cost of having the extra deck space.

4. Explain the opportunity costs Rose pays in choosing Jack over Hockley. What would you say is the “price” Rose paid for her love of Jack?

5. Titanic portrays many difficult choices that passengers made on that ill-fated night. Using your notes, discuss the opportunity costs of three of the passengers’ choices.

6. Identify the rationing devices used in the following scenes from Titanic: ▪ The tickets Jack and his friend obtain to board the Titanic

▪ First class luxury seats

▪ Boarding lifeboats in the early stages of the disaster, when people are unaware of, or ignored, the coming dangers.

▪ Boarding lifeboats after the passengers were aware that the ship was sinking rapidly and there were too few lifeboats.

Thinking in terms of: Example of this type of thinking:

Costs & Benefits

Trade-offs

What would have been

Unintended effects

Global economy

Micro/Macro

A consequence of scarcity is that people must make choices and compete for resources.

Resources (human, natural, capital) are needed to produce goods and services.

A rationing device is a way of determining who gets what and how much.

Price is a common rationing device.

Ex. Titanic – How would you ration life boats in a life and death situation?

Cost v. Benefit – a person will do whatever he is considering only if the benefits are greater than the costs

Trade off – more of one thing means less of something else

Effective decision making requires comparing the additional costs of alternatives with the additional benefits.

Most choices involve doing a little more or a little less of something: few choices are "all or nothing" decisions.

A situation in which more of one thing means less of something else. Ex. If a country spends more

on national defense than it will have less to spend on health care or education.

what did happen what would have been

intended

action effects positive

unintended

negative

Theory- is an explanation of how something works, designed to answer a question for which there is no obvious answer.

Correlation does not equal causation with the

scientific method. ▪ If time permits ..line up to show this concept

We should evaluate theories based not on how they sound to us, or whether they seem right, but on how well they predict the future.

often, there are competing explanations for what is occurring or will occur

a good theory is an accurate and reliable predictor of future results

1.Land- natural resources

2.Labor- physical & mental talents that contribute to the production of goods & services

3.Capital- produced goods used as resources for further production..i.e. tools, computers, machinery

4. Entrepreneurship – special talent for taking advantage of new business opportunities

RENT – for land

WAGES – for labor

INTEREST – for capital

PROFIT – entrepreneurship

missing? borrowed money for investment – payment = INTEREST

A person must pay to use a resource:

Land = Rent

Labor = Wages

Capital = Interest

Entrepreneurship = Profit

Read Chapter 1:2 - 1:4 Answer the following questions at the end of

each section.

Pg 13 #1-7, pg 20 #1-6 & pg 31 #3

Fill in the chart w/ details from Titanic