What Is Economics? Chapter 1 Section 1

Chapter 1 SECTION 1 Scarcity and the Factors of Production Essential Questions What Is economic dictionary NGSSS Guiding Question Chapter 1 UNIT 1: As you read the section, look for the How does scarcity Economics? LA.1112.1.6 Use multiple strategies to develop definitions of these Key Terms: How does economics affect everyone? vocabulary. force people to make • need • labor SS.912.E.1.1 Identify factors of production and economic choices? • want • capital CHAPTER 1: their necessity to making goods and services. Copy this cause-and-effect chart and fill • goods • physical capital How can we make the best economic choices? SS.912.E.2 Understand the concepts relevant to it in as you read. Essential Question, Chapter 1 the national economy. • services • human capital • scarcity Needs and Wants Resources SS.912.E.2.3 Research the contributions of A. Definition: A. Definition: key individuals of various backgrounds in the • economics How can we make the best B. Unlimited B. development of the U.S. • shortage C. Examples: C. Examples: Introduce the Chapter economic choices? • entrepreneur • factors of ACTIVATE PRIOR KNOWLEDGE production Necessity of Making Choices • land In this chapter students will learn how individuals, businesses, and governments make economic choices. Tell students to complete the warmup W Economics and You There are so many ways you could spend activity in the Essential Questions Journal. your money. You really want that new video game. You also want to attend an upcoming concert. At the same time, you need to pay your car insurance. With limited funds, you can’t have it all. How will you choose? Differentiated Instruction Key What’s true for you is also true for your neighbors, your school, the gas station on the corner, a major television network, and the U.S. Congress. L1 Special Needs Economics is the study of how individuals, businesses, and governments L2 Basic make choices when faced with a limited supply of resources. Principles in Action Scarcity forces us all to make choices by making us ELL English Language Learners need something decide which options are most important to us. In this section, you will essential for survival LPR Less Proficient Readers examine the problem of scarcity as it relates to such varied resources as water and the ingredients needed to make a plate of French fries. L3 All Students want something that people desire but that L4 Advanced Students is not necessary for Scarcity and Choice survival The study of economics begins with the fact that people cannot have everything they need and want. A need is something essential for survival such as food or medical care. A want is something that we desire but that goods the physical online Visit www.PearsonSchool.com/PHecon is not necessary for survival, such as video games or stylish haircuts. objects that someone produces for an interactive textbook with built-in activities on People satisfy their needs and wants with goods and services. Goods are physical objects that someone produces, such as food, clothing, or video economic principles. services the actions or games. Services are actions or activities that one person performs for activities that one person • The Wall Street Journal Classroom Edition another. Medical care and haircuts are services. performs for another Video presents a current topic related to making economic decisions. Next Generation Sunshine State Standards • Yearly Update Worksheet provides an annual Section 1: Scarcity and the Factors of Production update, including a new worksheet and lesson on LA.1112.1.6, SS.912.E.1.1, SS.912.E.2, SS.912.E.2.3 on the go online online online this topic. Section 2: Opportunity Cost Go to the Visual Glossary Go to Action Graph Online Go to How the Economy Works • On the Go resources can be downloaded so LA.1112.1.6, SS.912.E.1.1, SS.912.E.1.7, SS.912.E.3.6 To study anywhere, anytime, download these Online for an interactive review for animated versions of key Online for an interactive lesson online resources at PearsonSchool.com/PHecon of opportunity cost. charts and graphs. on the role of the entrepreneur. students and teachers can connect with economics Section 3: Production Possibilities Curves LA.1112.1.6, MA.912.A.2, SS.912.E.1.2, SS.912.E.2.3 anytime, anywhere. What Is EconomIcs? Chapter 1 SeCtION 1

NGSSS ECON13_SE_FL_CH01_CO.indd 2 3/1/11 2:49:39 PM ECON13_SE_FL_CH01_S01.indd 3 3/1/11 7:28:29 AM Block Scheduling Pressed for Time Next Generation Sunshine State Standards Block 1 Teach lessons for Sections 1 Visual resources Use How the and 2, briefly introducing the Section 2 Economy Works, the Visual Glossary, Section 1: LA.1112.1.6, SS.912.E.1.1, SS.912.E.2, material on trade-offs and focusing on and the Action Graphs Online to help SS.912.E.2.3 opportunity cost. students master the main concepts Section 2: LA.1112.1.6, SS.912.E.1.1, SS.912.E.1.7, from the chapter: factors of production, SS.912.E.3.6 Block 2 Teach the Section 3 lesson, omitting the Extend activity. opportunity cost, and production Section 3: LA.1112.1.6, MA.912.A.2, SS.912.E.1.2, possibilities curves. SS.912.E.2.3

Unit 1

ECON13_TE_FL_CH01_S01.indd 2 3/8/11 10:55:13 PM Chapter 1 • Section 1 SECTION 1 Scarcity and the Factors of Production What Is Guiding Question economic dictionary NGSSS Guiding Question Chapter 1 As you read the section, look for the How does scarcity Economics? LA.1112.1.6 Use multiple strategies to develop definitions of these Key Terms: How does scarcity force people vocabulary. force people to make • need • labor SS.912.E.1.1 Identify factors of production and economic choices? • want • capital to make economic choices? their necessity to making goods and services. Copy this cause-and-effect chart and fill • goods • physical capital SS.912.E.2 Understand the concepts relevant to it in as you read. Essential Question, Chapter 1 the national economy. • services • human capital • scarcity Needs and Wants Resources Get Started SS.912.E.2.3 Research the contributions of A. Definition: A. Definition: key individuals of various backgrounds in the • economics How can we make the best B. Unlimited B. development of the U.S. • shortage Needs and Wants Resources C. Examples: C. Examples: economic choices? • entrepreneur A. A need is A. Goods are • factors of something essential physical objects production Necessity of Making Choices for survival; a want is someone produces; • land something desired services are actions but not essential. one person performs B. Unlimited for another. W Economics and You There are so many ways you could spend C. Example of a B. Limited your money. You really want that new video game. You also want to need: medical care; C. Examples: land, attend an upcoming concert. At the same time, you need to pay your car example of a labor, and capital insurance. With limited funds, you can’t have it all. How will you choose? want: video games (physical and human) What’s true for you is also true for your neighbors, your school, the gas station on the corner, a major television network, and the U.S. Congress. Economics is the study of how individuals, businesses, and governments make choices when faced with a limited supply of resources. Principles in Action Scarcity forces us all to make choices by making us Necessity of Making Choices need something decide which options are most important to us. In this section, you will essential for survival examine the problem of scarcity as it relates to such varied resources as water and the ingredients needed to make a plate of French fries. LESSON GOALS want something that people desire but that Students will: is not necessary for Scarcity and Choice survival • Know the Key Terms. The study of economics begins with the fact that people cannot have everything they need and want. A need is something essential for survival • Characterize a good or service as a need, a want, such as food or medical care. A want is something that we desire but that goods the physical or both. is not necessary for survival, such as video games or stylish haircuts. objects that someone produces • Describe the characteristics of a successful People satisfy their needs and wants with goods and services. Goods are physical objects that someone produces, such as food, clothing, or video entrepreneur. services the actions or games. Services are actions or activities that one person performs for activities that one person • Identify the factors of production needed by a another. Medical care and haircuts are services. performs for another business. • Evaluate the impact of scarce resources. Next Generation Sunshine State Standards BEFORE CLASS Section 1: Scarcity and the Factors of Production LA.1112.1.6, SS.912.E.1.1, SS.912.E.2, SS.912.E.2.3 on the go online online online Have students complete the graphic organizer as Section 2: Opportunity Cost Go to the Visual Glossary Go to Action Graph Online Go to How the Economy Works they read. As an alternate activity, have students LA.1112.1.6, SS.912.E.1.1, SS.912.E.1.7, SS.912.E.3.6 To study anywhere, anytime, download these Online for an interactive review for animated versions of key Online for an interactive lesson complete the Guided Reading and Review online resources at PearsonSchool.com/PHecon Section 3: Production Possibilities Curves of opportunity cost. charts and graphs. on the role of the entrepreneur. worksheet (Unit 1 All-in-One, p. 13). LA.1112.1.6, MA.912.A.2, SS.912.E.1.2, SS.912.E.2.3 L1 L2 ELL LPR Differentiate Have students What Is EconomIcs? Chapter 1 SeCtION 1 complete the Guided Reading and Review worksheet (Unit 1 All-in-One, p. 14).

ECON13_SE_FL_CH01_CO.indd 2 3/1/11 2:49:39 PM ECON13_SE_FL_CH01_S01.indd 3 3/1/11 7:28:29 AM NGSSS Focus on the Basics Students need to come away with the following understandings: NGSSS

FACTS: • Scarcity is the constant condition in which only limited amounts of goods LA.1112.1.6 Use multiple strategies to develop vocabulary. and services are available to meet unlimited needs and wants. • Entrepreneurs SS.912.E.1.1 Identify factors of production and their necessity combine resources to produce goods or services. • The factors of production are to making goods and services. land, labor, and capital. SS.912.E.2 Understand the concepts relevant to the national economy. GENERALIZATION: Economics is the study of how people seek to satisfy their needs SS.912.E.2.3 Research the contributions of key individuals of and wants by making choices among scarce resources. various backgrounds in the development of the U.S.

Chapter

ECON13_TE_FL_CH01_S01.indd 3 3/18/11 12:43:01 PM Chapter 1 • Section 1 online For an animated, interactive version of What does an entrepreneur do? this feature, visit PearsonSchool.com/PHecon BELLRINGER Capital: All entrepreneurs—whether they are starting a lawn-mowing human-made Put a line on the board, with the word need on the service or founding a company that makes cars—have two resources left end and want on the right. Then write the words things in common. First, they recognize a need or want. Then, they must assemble the factors of production to meet car, water, and flowers on the board. Ask students that need or want. to copy this into their notebook, and place the items on the spectrum. Have them jot down why they placed the item where they did on the line. Kelly begins to Land: natural pull together the resources Kelly took a financial factors of production risk by opening her own she needs to turn her business. If the risk pays idea into reality. Human Capital: acquired off, Kelly gets profits…her Teach knowledge and skills workers get wages…and her customers get a healthy snack. online To present this topic using A new Physical Capital: objects digital resources, use the lecture notes on business starts used to create goods or to with an idea. Labor: people supply services to do the work www.PearsonSchool.com/PHecon. Kelly recognizes Check Your Understanding something her 1. How will reading and other types of L1 L2 ELL LPR Differentiate To help students town needs and does not have. self-education help this entrepreneur who are struggling readers, assign the Vocabulary succeed? worksheet (Unit 1 All-in-One, p. 12). 2. What impact does the concept of scarcity have on the decisions made by an entrepreneur? INTERPRET Have students explain why they decided an item was a need or a want. Did any items show up on both sides of the line? Give students time to discuss how The Problem of Limits Economics is the study of how people seek Entrepreneurs and the Land to satisfy their needs and wants by making a car could be both a need (transportation to work) People’s needs and wants are unlimited. Factors of Production Economists use the term land to refer and a want (if public transportation were available). When one want is satisfied, others arise. choices. Because people act individually, in to all natural resources used to produce groups (such as businesses), and through How are scarce resources turned into After eating lunch, you might want to go goods and services. Natural resources are Have students consider other goods or services that governments, economists study all three. goods and services? Entrepreneurs play to a movie or buy some clothes. Goods any materials found in nature that people could be identified in both categories. a key role. Entrepreneurs are people who and services, however, are limited. No one use to make things or to provide services. can have an endless supply of anything. Scarcity Versus Shortage decide how to combine resources to create entrepreneur a person Ask students to give examples of scarcity that they These resources include fertile land for who decides how to scarcity the principle Sooner or later, a limit is always reached. Scarcity is not the same thing as shortage. new goods and services. To make a profit, have faced. How did they make their choices? that limited amounts A shortage occurs when consumers want farming, as well as resources found in or combine resources of goods and services The fact that limited amounts of goods entrepreneurs are willing to take risks. to create goods and more of a good or service than producers on the land such as oil, iron, coal, water, L2 Differentiate To reinforce the difference are available to meet and services are available to meet unlim- They develop new ideas, start businesses, services unlimited wants are willing to make available at a particular and forests. ited wants is called scarcity. create industries, and fuel growth. between shortage and scarcity, explain that price. (You will learn how shortages are At many different levels, scarcity forces Anyone who opens a business, large or factors of production musical chairs represents a shortage. To show economics the study related to price in Chapter 6.) Shortages Labor the resources that are people to make choices. You, for example, small, is an entrepreneur. Jean-Baptiste Say, of how people seek may be temporary or long-term. The second factor of production is labor. used to make goods and scarcity, tell students that in 24 hours, they have to satisfy their needs have to decide how to spend your time. If an eighteenth-century French economist, services Unlike shortages, scarcity always exists. Labor is the effort people devote to tasks to accomplish 7 tasks, each requiring 4 hours. and wants by making you decide to study for a test, you cannot thought the risk-taking entrepreneur so There simply are not enough goods and choices go to the mall or do volunteer work at the important that he should be considered a for which they are paid. Labor includes Ask What resource is scarce? (time) How will services to supply all of society’s needs and land all natural same time. A store must choose between fourth factor of production. the medical care provided by a doctor, resources used to scarcity affect what they can do? (They will have shortage a situation wants. This is because the resources that hiring ten new workers or paying for more The first task facing an entrepreneur the classroom instruction provided by a produce goods and in which consumers go into making those goods and services services to choose which task will not be accomplished.) teacher, and the tightening of a bolt by want more of a good or advertising to attract new customers. A are themselves scarce. is to assemble factors of production, or service than producers city council might debate whether to use the resources used to make all goods and an assembly-line worker. Labor is also an HOW THE ECONOMY WORKS are willing to make labor the effort people its money to fix an aging school building CheCkpoint What is the main focus of services. The three main factors of produc- artist’s creation of a painting or a techni- available at a economics? devote to tasks for which Direct students to the How the Economy Works particular price or to hire more firefighters. tion are land, labor, and capital. cian’s repair of a television. they are paid feature. Ask What does an entrepreneur need to be successful? (an idea, research, factors of What Is EconomIcs? Chapter 1 SeCtION 1 production) What personality traits do you think an entrepreneur has? (risk taker, creative,

determined) Organize students into small groups ECON13_SE_FL_CH01_S01.indd 4 11/9/11 9:08:03 PM ECON13_SE_FL_CH01_S01.indd 5 11/9/11 9:08:15 PM to brainstorm a new business idea. Ask them to list ECN10NAE2_WSAO01_0101_0016.indd Page 16 12/25/08 11:27:07 PM user-s019/Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0 Name Class Date

CHAPTER Differentiated Resources PRE-READINGBIOGRAPHY ACTIVITY the factors of production needed to meet the need 1 WordMark Zuckerberg,Knowledge Rating CEO of Facebook 2 ECN10NAE4_WSAO01_0101_0017.inddSECTION 1 Page 17 1/29/09 3:42:45 AM users-021 /Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0017

Entrepreneurs put together land, labor, and capital to provide a new product or service. They take risks in the hope of gaining rewards. Name ______Class ______Date ______or want. Then ask Which factor would be the Mark Zuckerberg left college to start the online company Facebook.

L1 L2 Directions: Read CthisHAPTER passage to find out if his risk paid off. Guided Reading and Review (Unit 1 SOURCE READINGS IN ECONOMICS In February 2004, Mark1 ZuckerbergFactors ofa Production million members. in Whenthe Global investors Economy 4 and a college roommateSECTION created1 the gave the partners another $12.7 million easiest to obtain? Which would be the most Web site Facebook. Their idea was to in funds, the two hired workers and set up an online social network for moved into offices. Companies combine the factors of production—land, labor, and capital—to produce All-in-One, p. 14) students. They invited students to Members and advertisers liked goods and services. In today’s world, companies may operate in several countries to find join—for free. Inthose just factors a few ofweeks, production. most TheyFacebook, might hire so workersit continued in one to country grow. to make parts and students at theirthose university in another had country joined. to assembleIt added finished high schoolproducts. networks They seek and necessary funding difficult? How did the economic concept of Within months,from 30 other financial universities institutions anywherenetworks in the in world. other countries.Have these trends changed the basic had Facebook. importance of the factors of production? As it grew, ◆ Read the this company excerpt from bought an essay by Fareed Zakaria, That summer,the Zuckerberg editor of Newsweek and his International, more computers.and then answer It hired the questions engineers, that follow. L1 L2 Vocabulary worksheet (Unit 1 All-in-One, roommate met with investors who salespeople, and customer service For decades, American workers, whether . . . So what do American companies provide money to entrepreneurs to staff. Zuckerberg became a billionaire. in car companies, steel plants, or banks, bring to Brazil or India? What is the scarcity determine your answers? start new companies.had one One enormous offered advantage Severalover companiesUnited have States’ offered competitive to buy advantage? them $500,000 toall workother onworkers: Facebook privileged accessFacebook, to but ZuckerbergThis is a question has turned few American full time. They Americanleft college capital. and worked They could themuse that down. Hebusinesspeople wants to manage thought the they would p. 12) day and night. accessSoon, Facebookto buy technology had and trainingcompany’s growthever himself.have to answer. The answer lies in that no one else had—and thus produce something the economist Martin Wolf products that no one else could, and at noted. Economists used to discuss two Questions tocompetitive Think About prices. That special access basic concepts, capital and labor. But these is also gone. The world is swimming in are now commodities, widely available to Directions: Usingcapital, the andpassage suddenly above, American answer workers the following everyone. What distinguishes economies questions. Use havecomplete to ask sentences. themselves, What can we do today are ideas and energy. A country can L2 1. What kind ofbetter land, thanlabor, others? and capital It is a dilemmadid Zuckerberg not just use prosperto create if it is a source of ideas or energy Mark Zuckerberg, CEO of Facebook (Unit 1 and run Facebook?for workers Identify but two for companiesout of the threeas well. factors offor production. the world. When American companies went abroad, —Fareed Zakaria, “The Future of American Power,” they used to bring with them capital and Foreign Affairs, May-June 2008. know-how. But when they go abroad now, 2. What need doesthey Facebookdiscover that meet? the natives already have All-in-One, p. 16) money and already know how. 3. Why do you think Facebook grew so quickly? Questions to Think About

1. How does the author characterize the challenges does it present to U.S. 4. What risks did ZuckerbergUnited States take? position in the global workers and companies? economy compared to its past position? 4. Do you think economist Martin Wolf Answer L4 Factors of Production in the Global 2. Into what categories of factors of is correct in his assertion that energy production do energy and ideas belong? and ideas are now the most important factors of production? Why or why 3. If the global economy has changed in Copyright © by Pearson Education, Inc., or its affiliates. All rights reserved.not? Checkpoint Economics focuses on how people seek Economy (Unit 1 All-in-One, p. 17) the ways the Zakaria outlined,16 what

Unit 1

ECON13_TE_FL_CH01_S01.indd 4 11/10/11 8:11:04 AM online Chapter 1 • Section 1 For an animated, interactive version of What does an entrepreneur do? this feature, visit PearsonSchool.com/PHecon Capital: DISTRIBUTE ACTIVITY WORKSHEET All entrepreneurs—whether they are starting a lawn-mowing human-made service or founding a company that makes cars—have two resources Distribute the “Mark Zuckerberg, CEO of Facebook” things in common. First, they recognize a need or want. worksheet (Unit 1 All-in-One, p. 15). Tell students Then, they must assemble the factors of production to meet that need or want. that they will read a biography of a contemporary entrepreneur. After they complete the worksheet, ask How did scarcity affect Zuckerberg’s Kelly begins to Land: natural choices? (Possible answers: He developed a product, pull together the resources Kelly took a financial factors of production risk by opening her own a social Web site, that students did not have. He did she needs to turn her business. If the risk pays not have time to both go to school and develop a idea into reality. Human Capital: acquired off, Kelly gets profits…her knowledge and skills workers get wages…and business. He had to decide how to spend money to her customers get a healthy snack. increase the size of his business.) ECN10NAE3_WSAO01_0101_0015.indd Page 15 1/29/09 3:42:37 AM users-021 /Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0015 Physical Capital: objects A new Name ______Class ______Date ______

used to create goods or to CHAPTER business starts BIOGRAPHY Labor: people supply services 1 Mark Zuckerberg, CEO of Facebook 3 with an idea. SECTION 1 to do the work Kelly recognizes Entrepreneurs combine land, labor, and capital to provide a product or service. In Check Your Understanding doing so, they take risks in the hope of gaining rewards. Mark Zuckerberg was a something her college student when he left school to launch Facebook. Did his risk pay off? ◆ Read the 1. How will reading and other types of biography below, and then answer the questions that follow on a separate sheet of paper. town needs and In February 2004, Mark Zuckerberg and Members like Facebook because they self-education help this entrepreneur a college roommate started the original pay nothing to join and control what does not have. version of the Web site Facebook. They information they publish and who can wanted to create online social networks for see it. Advertisers love Facebook because succeed? students. The two entrepreneurs created they can target their ads, which provide an online forum and invited students to Facebook its revenues. 2. What impact does the concept of scarcity have join—for free. In just a few weeks, nearly two-thirds of their school’s students had To grow, Facebook added networks for joined. Within months, Facebook had high schools and workplaces and began on the decisions made by an entrepreneur? networks at thirty other universities. attracting older members. By 2008, the company had networks in several That summer, Zuckerberg made contact countries and more than 70 million users with venture capitalists—business people of its Web site. who provide entrepreneurs with money to start new companies. When one offered With growth, Facebook had to keep them $500,000 to work on Facebook full buying more computers and hiring more time, Zuckerberg and his colleague left software engineers, salespeople, and college and worked day and night writing customer service staff. Despite rising computer code. By the fall, Facebook costs, growing income made Zuckerberg had a million members. Six months later, and other shareholders rich. Several Zuckerberg and his partner got $12.7 companies have offered to buy Facebook, million more in funding, hired more but Zuckerberg won’t sell. He wants to workers, and moved the company out continue to manage his company’s growth of the apartments where they lived and himself. worked and into offi ces. Economics is the study of how people seek Questions to Think About The Problem of Limits Land 1. Recall the three factors of production. 4. What might prevent further growth of Entrepreneurs and the What land, labor, and capital did Facebook? Zuckerberg use in creating and to satisfy their needs and wants by making 5. A Web site similar to Facebook also running Facebook? People’s needs and wants are unlimited. Economists use the term land to refer enjoyed early success. Its head refused 2. (a) What risk did Zuckerberg take? (b) Did to sell the company despite high offers. choices. Because people act individually, in Factors of Production it pay off? Why do you think so? Then the Web site lost popularity and it became unattractive to future When one want is satisfied, others arise. 3. What needs or wants does Facebook to all natural resources used to produce buyers. In light of this example, if you meet? were Zuckerberg, would you have sold groups (such as businesses), and through How are scarce resources turned into Facebook? Explain. After eating lunch, you might want to go goods and services. Natural resources are governments, economists study all three. goods and services? Entrepreneurs play to a movie or buy some clothes. Goods any materials found in nature that people Copyright © by Pearson Education, Inc., or its affiliates. All rights reserved. a key role. Entrepreneurs are people who 15 and services, however, are limited. No one use to make things or to provide services. can have an endless supply of anything. Scarcity Versus Shortage decide how to combine resources to create entrepreneur a person These resources include fertile land for who decides how to L2 Differentiate Distribute the “Mark Zuckerberg, scarcity the principle Sooner or later, a limit is always reached. Scarcity is not the same thing as shortage. new goods and services. To make a profit, that limited amounts A shortage occurs when consumers want farming, as well as resources found in or combine resources CEO of Facebook” worksheet (Unit 1 All-in-One, of goods and services The fact that limited amounts of goods entrepreneurs are willing to take risks. to create goods and more of a good or service than producers on the land such as oil, iron, coal, water, are available to meet and services are available to meet unlim- They develop new ideas, start businesses, services p. 16). unlimited wants are willing to make available at a particular and forests. ited wants is called scarcity. create industries, and fuel growth. price. (You will learn how shortages are L2 ELL Differentiate Pair English learners with At many different levels, scarcity forces Anyone who opens a business, large or factors of production economics the study related to price in Chapter 6.) Shortages Labor the resources that are people to make choices. You, for example, small, is an entrepreneur. Jean-Baptiste Say, language proficient students to answer the questions of how people seek may be temporary or long-term. The second factor of production is labor. used to make goods and to satisfy their needs have to decide how to spend your time. If an eighteenth-century French economist, services on the worksheet. Unlike shortages, scarcity always exists. Labor is the effort people devote to tasks and wants by making you decide to study for a test, you cannot thought the risk-taking entrepreneur so There simply are not enough goods and L4 Differentiate Have students write a paragraph choices go to the mall or do volunteer work at the important that he should be considered a for which they are paid. Labor includes services to supply all of society’s needs and land all natural same time. A store must choose between fourth factor of production. the medical care provided by a doctor, resources used to explaining who they think took the bigger risk— shortage a situation wants. This is because the resources that hiring ten new workers or paying for more The first task facing an entrepreneur the classroom instruction provided by a produce goods and Zuckerberg or the venture capitalist who agreed to in which consumers go into making those goods and services services teacher, and the tightening of a bolt by want more of a good or advertising to attract new customers. A are themselves scarce. is to assemble factors of production, or fund his startup efforts. Tell them to give reasons to service than producers city council might debate whether to use the resources used to make all goods and an assembly-line worker. Labor is also an are willing to make labor the effort people support their responses. its money to fix an aging school building CheCkpoint What is the main focus of services. The three main factors of produc- artist’s creation of a painting or a techni- available at a economics? devote to tasks for which particular price or to hire more firefighters. tion are land, labor, and capital. cian’s repair of a television. they are paid

What Is EconomIcs? Chapter 1 SeCtION 1

ECON13_SE_FL_CH01_S01.indd 4 11/9/11 9:08:03 PM ECON13_SE_FL_CH01_S01.indd 5 11/9/11 9:08:15 PM Background Note Jean-Baptiste Say Jean-Baptiste Say was a nineteenth-century classical economist and businessman. He was influenced by Adam Smith’s laissez-faire ideas and spread these ideas in Europe and North America. Say is best known for Say’s Law, which states that “supply creates its own demand.” This is most commonly interpreted to Answers mean that production of one kind of good facilitates the production of other goods. Check Your Understanding Possible answers: When a producer receives money for a good, that producer is able and likely to 1. Kelly will learn more about how to make the spend the money on other goods. In this way, the supply created by the producer is smoothies nutritious; she can experiment with increasing demand for other goods. Say is also credited with having coined the term recipes to improve the product; she can learn about entrepreneur. the best ways to start and run a small business. 2. An entrepreneur has to decide how to best combine limited resources to meet a need or want.

Chapter 1

ECON13_TE_FL_CH01_S01.indd 5 11/10/11 8:12:11 AM Chapter 1 • Section 1 capital any human- Capital knowledge and skills a worker gains dishes away. A chore that used to require the potatoes grew. Nurtured with fertil- made resource that is through education and experience is 21 hours to complete now takes only izers and protected by pesticides, the used to produce other The term capital refers to any human-made goods and services resource that is used to produce other human capital. Computer designers go to 7 hours. This example shows the typical potatoes grew until they were harvested, EXTEND goods and services. Economists divide college to study engineering, electronics, benefits of using capital: processed, frozen, and then transported to physical capital the capital into two types—physical capital and computers. They build their human 1. Extra time The family saves 14 hours a Seattle. There they were fried in corn oil Ask students to imagine that they are planning human-made objects capital, making it possible for them to from Nebraska, sprinkled with salt from used to create other and human capital. week. This is time that can be used for a new housing development. What needs and goods and services Human-made objects used to create design and build faster and more powerful other activities. Louisiana, and eaten in a restaurant. wants would the community have? (Needs could other goods and services are physical computers. Auto mechanics also increase 2. More knowledge By learning how to All of the factors of production used to human capital capital. (Sometimes economists use the their human capital through schooling and use the dishwasher, family members produce those French fries are scarce. First, be a water source, electricity; wants could be a pool, the knowledge and experience. This knowledge gives them the the amount of land and water available for skills a worker gains term capital goods for physical capital.) learn more about using household train access.) The housing development has been through education and The buildings that house a computer skills to diagnose and fix an engine that is appliances in general. They can apply growing potatoes is limited. Second, the changed to a retirement community. How would experience manufacturing company are physical not running properly. that knowledge to using washing labor available to grow the crop and to the needs and wants change? Use this discussion capital as are all the equipment and tools An economy requires both physical machines, dryers, and other appliances. harvest, process, transport, and cook the needed to make those computers. and human capital to produce goods and 3. More productivity With extra time potatoes is limited by the size, time, age, to help students understand that needs, wants, and In addition to producing physical capital, services. Doctors need both stethoscopes and more knowledge, family members and energy of the population. Finally, the resources change depending on the situation. people can also invest in themselves. The and schooling to provide healthcare. can use their resources and labor to amount of physical capital available to create Assembly-line workers use tools as well as do other chores, to learn other skills, the French fries, such as farm machines or L4 Differentiate Assign the “Factors of Production their own skills acquired through training or simply to enjoy themselves. Every cooking equipment, is also limited. in the Global Economy” worksheet (Unit 1 and practice. member of the family benefits. The same principles apply to a pair All-in-One, p. 17). Discuss the questions with the of blue jeans, an MP3 player, or a space Benefits of Capital CheCkpointWhat are the factors of shuttle. No matter what good or service students, having them focus on how the global Water Wars? production? Throughout history, wars have been fought over scarce natural Capital is a key factor of production we look at, the supplies of land, labor, and economy changes the availability of different factors resources—from gold to oil. Many experts predict that future because people and companies can use it capital used to produce it are scarce. We of production. wars may be fought over another scarce resource: water. to save a great deal of time and money. Scarce Resources would also notice another fact about those Millions of people around the world already live without access resources—each one has many alternative to clean, safe water. Predict three economic or social Physical capital such as machines and All goods and services are scarce because Guiding Question Wrap Up consequences that might occur in a country where water tools help workers produce goods and the resources used to produce them are uses. Individuals, businesses, and governments have to choose which alternative Have students return to the section Guiding was scarce. services more easily and at less cost. scarce. Consider French fries. A typical As a result, they become more produc- portion of French fries might have started they most want. Question. Review the completed graphic organizer tive. Human capital such as technical Population With Sustainable Access to an Improved as potatoes in a field in Idaho. Ten gallons CheCkpointWhy are goods and and clarify any misunderstandings. Have a wrap up knowledge has the same result. The more Water Source (Percentage) 2004 of water irrigated the half-foot plot where services scarce? discussion about how scarcity forces people to make skills a worker gains, the more produc- LA.1112.2.2.2, LA.1112.1.6.1, SS.912.E.1.1, choices. tive he or she becomes. Many businesses provide training for their employees for SS.912.E.2 To continue to build a United Egypt India China Romania response to the Essential this reason. Journal Question, go to your States To understand the benefit of investing SECTION 1 ASSESSMENT Essential Questions Journal. in capital, consider the following example. SECTION Assessment Assess and Remediate A family of six people washes dishes by Critical Thinking Quick Write hand after every meal—breakfast, lunch, Guiding Question L3 L2 Collect the “Mark Zuckerberg, CEO Use your completed cause-and- 7. Classify Identify the factor of pro- 10. Look at the How the Economy 100% 98% 86% 77% 57% and dinner. That is a total of 21 meals 1. of Facebook” worksheet and assess student effect chart to answer this question: duction represented by each of the Works feature in this section. Make a per week. It takes 30 minutes per meal How does scarcity force people to following: (a) fishing waters, (b) an list of the risks an entrepreneur takes understanding of the role of entrepreneurs. for two family members working together make economic choices? office building, (c) clerks in a store, and the possible rewards he or she to scrape, stack, wash, rinse, dry, and put 2. Extension Describe how scarcity of (d) a tractor, (e) a student in a cook- might gain. Then, write a brief para- L4 Collect the “Factors of Production in the ing school. Explain. Haiti Nigeria Cambodia Papua Ethiopia away the dishes. As a result, the family time, money, or resources affected a graph explaining why entrepreneurs 8. Infer If companies can become are important to the economy of a Global Economy” worksheet and assess student New spends 21 hours a week cleaning dishes— recent economic decision you made. more productive by increasing their community or nation. understanding. Guinea time that could have been spent on other Key Terms and Main Ideas physical capital, why would a com- more productive activities. pany not buy up-to-date computers 3. What is the difference between L3 Section 1 Assessment Now, suppose that the family saves for all employees each year? goods and services? up and spends $400 on some physical 9. Apply Think of a good or service L3 Give Section Quiz A (Unit 1 All-in-One, p. 18). 54% 48% 41% 39% 22% 4. How does scarcity differ from a that you consumed today. List at capital—a dishwasher. Using the dish- shortage? L2 least five factors of production used Give Section Quiz B (Unit 1 All-in-One, p. 19). washer, it takes only one family member 5. What does an entrepreneur do? 15 minutes after each meal to stack the to produce that good or service. 6. What is a benefit of using both Include at least one example each of (Assess and Remediate continued on p. 7) SOURCE: Globalhealthfacts.org dishwasher and another family member physical capital and human land, labor, and capital. 15 minutes at the end of the day to put the capital?

What Is EconomIcs? Chapter 1 SeCtION 1

ECON13_SE_FL_CH01_S01.indd 6 2/14/11 1:47:19 PM ECON13_SE_FL_CH01_S01.indd 7 3/1/11 7:28:57 AM services and evaluate the opportunities Virtual Economics it presents to entrepreneurs. L3 Differentiate Exploring Scarcity Use the following Lesson Title Scarcity: Everyone’s lesson from the NCEE Virtual Problem is the Economics CD-ROM to define scarcity Entrepreneur’s and determine how it can be an Opportunity opportunity. Click on Browse Economics Answer Type of Activity Classifying Lessons, specify grades 9–12, and use Global Impact Possible responses: higher rates of the key words everyone’s problem. Complexity Low disease and death; conflict among those who share Time 100 minutes water supplies; crops cannot be grown but must be In this activity, students will analyze the imported concept of scarcity in goods and NCEE Standards 1

Unit 1

ECON13_TE_FL_CH01_S01.indd 6 3/18/11 12:59:15 PM capital any human- Capital knowledge and skills a worker gains dishes away. A chore that used to require the potatoes grew. Nurtured with fertil- Chapter 1 • Section 1 made resource that is through education and experience is 21 hours to complete now takes only izers and protected by pesticides, the used to produce other The term capital refers to any human-made goods and services resource that is used to produce other human capital. Computer designers go to 7 hours. This example shows the typical potatoes grew until they were harvested, goods and services. Economists divide college to study engineering, electronics, benefits of using capital: processed, frozen, and then transported to Have students complete the Self-Test Online and physical capital the capital into two types—physical capital and computers. They build their human 1. Extra time The family saves 14 hours a Seattle. There they were fried in corn oil human-made objects continue their work in the Essential Questions and human capital. capital, making it possible for them to week. This is time that can be used for from Nebraska, sprinkled with salt from used to create other Journal. goods and services Human-made objects used to create design and build faster and more powerful other activities. Louisiana, and eaten in a restaurant. other goods and services are physical computers. Auto mechanics also increase 2. More knowledge By learning how to All of the factors of production used to human capital capital. (Sometimes economists use the their human capital through schooling and use the dishwasher, family members produce those French fries are scarce. First, REMEDIATION AND SUGGESTIONS the knowledge and experience. This knowledge gives them the the amount of land and water available for skills a worker gains term capital goods for physical capital.) learn more about using household Use the chart below to help students who are skills to diagnose and fix an engine that is growing potatoes is limited. Second, the through education and The buildings that house a computer appliances in general. They can apply struggling with content. experience manufacturing company are physical not running properly. that knowledge to using washing labor available to grow the crop and to capital as are all the equipment and tools An economy requires both physical machines, dryers, and other appliances. harvest, process, transport, and cook the needed to make those computers. and human capital to produce goods and 3. More productivity With extra time potatoes is limited by the size, time, age, WEAKNESS REMEDIATION In addition to producing physical capital, services. Doctors need both stethoscopes and more knowledge, family members and energy of the population. Finally, the people can also invest in themselves. The and schooling to provide healthcare. can use their resources and labor to amount of physical capital available to create Defining key terms Have students use the Assembly-line workers use tools as well as do other chores, to learn other skills, the French fries, such as farm machines or (Questions 3, 4, 5, 6) interactive Economic their own skills acquired through training or simply to enjoy themselves. Every cooking equipment, is also limited. Dictionary Online. and practice. member of the family benefits. The same principles apply to a pair of blue jeans, an MP3 player, or a space Describing scarcity Have students CheCkpointWhat are the factors of shuttle. No matter what good or service Water Wars? Benefits of Capital (Questions 1, 2, 4) summarize the meaning production? we look at, the supplies of land, labor, and Throughout history, wars have been fought over scarce natural Capital is a key factor of production of scarcity in their own resources—from gold to oil. Many experts predict that future because people and companies can use it capital used to produce it are scarce. We wars may be fought over another scarce resource: water. to save a great deal of time and money. Scarce Resources would also notice another fact about those words. Millions of people around the world already live without access Physical capital such as machines and resources—each one has many alternative to clean, safe water. Predict three economic or social All goods and services are scarce because Explaining factors of Have students consequences that might occur in a country where water tools help workers produce goods and the resources used to produce them are uses. Individuals, businesses, and govern- was scarce. services more easily and at less cost. scarce. Consider French fries. A typical ments have to choose which alternative production (Questions review the factors of As a result, they become more produc- portion of French fries might have started they most want. 5, 6, 7, 8, 9, 10) production used by tive. Human capital such as technical Population With Sustainable Access to an Improved as potatoes in a field in Idaho. Ten gallons CheCkpointWhy are goods and the entrepreneur to knowledge has the same result. The more Water Source (Percentage) 2004 of water irrigated the half-foot plot where services scarce? start the frozen yogurt skills a worker gains, the more productive he or she becomes. Many businesses LA.1112.2.2.2, LA.1112.1.6.1, SS.912.E.1.1, business in How the provide training for their employees for SS.912.E.2 To continue to build a Economy Works. United Egypt India China Romania response to the Essential this reason. Journal Question, go to your States To understand the benefit of investing SECTION 1 ASSESSMENT Essential Questions Journal. in capital, consider the following example. SECTION Assessment A family of six people washes dishes by Critical Thinking Quick Write hand after every meal—breakfast, lunch, Guiding Question 7. Classify Identify the factor of pro- 10. Look at the How the Economy 100% 98% 86% 77% 57% and dinner. That is a total of 21 meals 1. Use your completed cause-and- effect chart to answer this question: duction represented by each of the Works feature in this section. Make a per week. It takes 30 minutes per meal How does scarcity force people to following: (a) fishing waters, (b) an list of the risks an entrepreneur takes for two family members working together make economic choices? office building, (c) clerks in a store, and the possible rewards he or she to scrape, stack, wash, rinse, dry, and put 2. Extension Describe how scarcity of (d) a tractor, (e) a student in a cook- might gain. Then, write a brief para- ing school. Explain. Haiti Nigeria Cambodia Papua Ethiopia away the dishes. As a result, the family time, money, or resources affected a graph explaining why entrepreneurs 8. Infer If companies can become are important to the economy of a New spends 21 hours a week cleaning dishes— recent economic decision you made. more productive by increasing their community or nation. Guinea time that could have been spent on other Key Terms and Main Ideas physical capital, why would a com- more productive activities. pany not buy up-to-date computers 3. What is the difference between Now, suppose that the family saves for all employees each year? goods and services? Answers up and spends $400 on some physical 9. Apply Think of a good or service 54% 48% 41% 39% 22% 4. How does scarcity differ from a that you consumed today. List at capital—a dishwasher. Using the dish- shortage? Checkpoint land, labor, and physical and human least five factors of production used washer, it takes only one family member 5. What does an entrepreneur do? capital 15 minutes after each meal to stack the to produce that good or service. 6. What is a benefit of using both Include at least one example each of SOURCE: Globalhealthfacts.org dishwasher and another family member physical capital and human land, labor, and capital. Checkpoint because resources used to produce 15 minutes at the end of the day to put the capital? them are scarce

What Is EconomIcs? Chapter 1 SeCtION 1

LA.1112.2.2.2, LA.1112.1.6.1, SS.912.E.1.1, SS.912.E.2

ECON13_SE_FL_CH01_S01.indd 6 2/14/11 1:47:19 PM ECON13_SE_FL_CH01_S01.indd 7 3/1/11 7:28:57 AM Assessment Answers

1. Because resources are scarce, people 5. They combine resources to provide goods capital (gasoline, roads, the bus, the bus cannot satisfy all their needs and wants. and services. driver’s expertise at driving). 2. Possible response: I had enough money to 6. This can lead to savings in other factors of 10. Possible response: Entrepreneurs risk buy an MP3 player or a camera, so I bought production. losing the money they invest for the the MP3 player. 7. (a) land; (b) physical capital; (c) labor; possible reward of financial gain.Students’ 3. Goods are physical objects someone (d) physical capital; (e) human capital paragraphs should note such contributions produces. Services are actions someone 8. Possible response: It may not have the as developing original ideas and starting does for another. money to buy new ones every year. new businesses that create a variety of 4. Scarcity is constant; shortages occur 9. Possible response: I took the bus. The trip goods and services, employing people in when people want more of an item than used land (oil); labor (driver’s work); and the process. producers will provide at a particular price.

Chapter 1

ECON13_TE_FL_CH01_S01.indd 7 3/8/11 10:56:37 PM Chapter 1 • Section 2 Businesses and Trade-Offs example above. If squash was the most “guns or butter” a phrase expressing the The decisions that businesses make about profitable alternative to broccoli, then the SECTION 2 Opportunity Cost idea that a country that how to use their factor resources—land, opportunity cost of deciding to plant broc- decides to produce more Guiding Question labor, and capital—also involve trade-offs. coli was the chance to plant squash. military goods (“guns”) economic dictionary Even simple decisions carry opportunity has fewer resources Guiding Question A farmer who plants broccoli cannot at to produce consumer NGSSS costs. Consider the following choices: As you read the section, look for How does opportunity the same time use the same area of land goods (“butter”) and vice How does opportunity cost LA.1112.1.6 Use multiple strategies to develop the definitions of these Key Terms: to grow squash. A furniture company that • Sleep late or wake up early to study for versa vocabulary. cost affect decision • trade-off decides to use all of its equipment to make a test? SS.912.E.1.1 Identify factors of production and making? affect decision making? • “guns or butter” chairs eliminates the possibility of using the • Sleep late or wake up early to eat their necessity to making goods and services. Copy this concept web and fill it in as opportunity cost • opportunity cost same equipment to build tables or desks. breakfast? the most desirable Graph and explain how price is you read. Add more ovals if necessary. SS.912.E.1.7 alternative given up as determined through marginal cost analysis. • thinking at the margin • Sleep late or wake up early to go on a Governments and Trade-Offs the result of a decision Get Started • cost/benefit analysis By individuals ski trip? SS.912.E.3.6 Draw conclusions about historical National, state, and local governments economic theories of economists. • marginal cost also make decisions that involve trade- Most likely, you did not choose “sleep • marginal benefit Affects decisions Opportunity late” for all three decisions. Your deci- SS.912.E.3.6 Cost offs. Economists and politicians use the By businesses at all levels sion depended on the specific opportunity Draw conclusions Use term “guns or butter” to describe one of about historical By decision-making cost—the value to you of what you were By individuals Characteristics One of many the common choices facing governments: economic theories governments grid trade-offs the choice between spending money on willing to sacrifice. of economists. military or domestic needs. A country that decides to produce more military goods Affects The most (“guns”) has fewer resources to devote to decisions at all Opportunity desirable W Economics and You You are cleaning your bedroom. Boxes, levels Cost alternative clothes, and other items cover your bed, the floor, the entire room. consumer goods (“butter”) and vice versa. Suddenly, your phone rings and a friend invites you to a party. You The steel needed to produce a tank cannot Trade-offs then be used to produce a tractor. May involve consider your options and quickly decide that going to the party will be One of many In November 2007, as U.S. troops Characteristics thinking at more fun than cleaning your room. trade-offs the margin Later, tired but happy, you enter your bedroom and realize that you fought in Iraq, one commentator described now have to clear off your bed when all you want to do is sleep. Your the tough choice facing American leaders decision to go to the party cost you the time you needed to clean up your and voters: LESSON GOALS room. Was the benefit of your choice worth the cost? Like Santa with a wish list that cannot Principles in Action Every time we choose to do something, we give up “be satisfied, the country enters the New You take a part-time Students will: the opportunity to do something else. As you will see, even such a simple Year with a needs list that far exceeds our job after school in order decision as how late to sleep in the morning involves weighing costs revenue sources. It appears once again to save up money to • Know the Key Terms. buy a car. Your and benefits. The Economics & You feature shows how scarcity and that it is time to wage the debate of guns trade-off is time for • Analyze the trade-offs involved in decision choice can affect the ways you spend your time and what services your or butter. . . . Citizens are simultaneously money and wheels. making. community provides. confronted with funding a war abroad and • Explain how changing economic factors can dealing with rising health costs, increased Your town can afford to fix fuel costs and declining human services local roads or keep the library change decisions and opportunity costs. Trade-Offs at home. open on mornings and Economists point out that all individuals, businesses, and large groups Saturdays – but not both. The • Provide examples of decision making at the —Charles Bogue, “Guns or Butter,”” Napa Valley Register town council trades off full of people—even governments—make decisions that involve trade-offs. A library service for road margin. trade-off is the act of giving up one benefit in order to gain another, greater In the end, the reason for the “guns or improvements. benefit. Trade-offs often involve things that can be easily measured, such butter” trade-off is the same as the reason BEFORE CLASS as money, property, or time. But trade-offs may also involve values that are for any other trade-off: scarcity. Students should read the section for homework not so easy to measure. Such intangibles include enjoyment, job satisfac- CheCkpointWhat are trade-offs? tion, or the feeling of well-being that comes from helping somebody. before coming to class. Individuals and Trade-Offs Determining Have students complete the graphic organizer as Opportunity Cost they read the text. As an alternate activity, have At every stage of life, you have to make trade-offs. Taking a part in the school play prevents you from playing soccer or getting a part-time job. In most trade-offs, one of the rejected students complete the Guided Reading and Review A few years from now, you might decide to turn down an exciting but alternatives is more desirable than the rest. worksheet (Unit 1 All-in-One, p. 20). trade-off the act of low-paying job in favor of a less interesting job that pays better. Still later, The most desirable alternative somebody Every decision we make involves trade-offs. That’s why they can be diffi- giving up one benefit in cult. Describe one decision you made this week. Identify the trade-offs you may choose to give up a vacation in order to put more money away gives up as the result of a decision is the L1 L2 order to gain another, involved. ELL LPR Differentiate Have students greater benefit for your retirement. opportunity cost. Take the farmer in the complete the Guided Reading and Review worksheet (Unit 1 All-in-One, p. 21). What Is EconomIcs? Chapter 1 SeCtion 2

NGSSS ECON13_SE_FL_CH01_S02.indd 8 3/1/11 7:24:57 AM ECON13_SE_FL_CH01_S02.indd 9 3/1/11 7:25:16 AM Focus on the Basics NGSSS Students need to come away with the following understandings:

LA.1112.1.6 Use multiple strategies to develop vocabulary. FACTS: • Each choice we make involves trade-offs, giving up one benefit for another. SS.912.E.1.1 Identify factors of production and their necessity • Opportunity cost is the single most desirable alternative given up due to a trade-off. to making goods and services. • Thinking at the margin involves deciding whether to use one more or one less unit SS.912.E.1.7 Graph and explain how price is determined of a resource. through marginal cost analysis. GENERALIZATION: Every economic decision we make involves trade-offs; the most SS.912.E.3.6 Draw conclusions about historical economic desirable choice given up is the opportunity cost. theories of economists.

Unit 1

ECON13_TE_FL_CH01_S02.indd 8 3/8/11 10:57:44 PM Businesses and Trade-Offs example above. If squash was the most “guns or butter” a Chapter 1 • Section 2 phrase expressing the The decisions that businesses make about profitable alternative to broccoli, then the SECTION 2 Opportunity Cost idea that a country that how to use their factor resources—land, opportunity cost of deciding to plant broc- decides to produce more labor, and capital—also involve trade-offs. coli was the chance to plant squash. military goods (“guns”) BELLRINGER economic dictionary Even simple decisions carry opportunity has fewer resources Guiding Question A farmer who plants broccoli cannot at to produce consumer NGSSS costs. Consider the following choices: Have students think of recent decisions they made As you read the section, look for How does opportunity the same time use the same area of land goods (“butter”) and vice LA.1112.1.6 Use multiple strategies to develop the definitions of these Key Terms: to grow squash. A furniture company that • Sleep late or wake up early to study for versa and what they had to give up as a result. vocabulary. cost affect decision • trade-off decides to use all of its equipment to make a test? SS.912.E.1.1 Identify factors of production and making? • “guns or butter” chairs eliminates the possibility of using the • Sleep late or wake up early to eat their necessity to making goods and services. Copy this concept web and fill it in as opportunity cost • opportunity cost same equipment to build tables or desks. breakfast? the most desirable SS.912.E.1.7 Graph and explain how price is you read. Add more ovals if necessary. alternative given up as Teach determined through marginal cost analysis. • thinking at the margin • Sleep late or wake up early to go on a the result of a decision • cost/benefit analysis By individuals Governments and Trade-Offs ski trip? SS.912.E.3.6 Draw conclusions about historical National, state, and local governments economic theories of economists. • marginal cost also make decisions that involve trade- Most likely, you did not choose “sleep online To present this topic using • marginal benefit Affects decisions Opportunity late” for all three decisions. Your deci- SS.912.E.3.6 Cost offs. Economists and politicians use the at all levels sion depended on the specific opportunity Draw conclusions digital resources, use the lecture notes on term “guns or butter” to describe one of about historical cost—the value to you of what you were www.PearsonSchool.com/PHecon. Characteristics One of many the common choices facing governments: economic theories trade-offs the choice between spending money on willing to sacrifice. of economists. military or domestic needs. A country that ANALYZE decides to produce more military goods Create a chart on the board with three columns W Economics and You You are cleaning your bedroom. Boxes, (“guns”) has fewer resources to devote to labeled Decision, Alternatives, and Opportunity consumer goods (“butter”) and vice versa. clothes, and other items cover your bed, the floor, the entire room. Cost. Have volunteers from the class fill in the first Suddenly, your phone rings and a friend invites you to a party. You The steel needed to produce a tank cannot Trade-offs consider your options and quickly decide that going to the party will be then be used to produce a tractor. two columns with their answer from the Bellringer more fun than cleaning your room. In November 2007, as U.S. troops activity. Ask students Which of the alternatives Later, tired but happy, you enter your bedroom and realize that you fought in Iraq, one commentator described you gave up was the most desirable? Write the tough choice facing American leaders now have to clear off your bed when all you want to do is sleep. Your these answers in the Opportunity Cost column. decision to go to the party cost you the time you needed to clean up your and voters: room. Was the benefit of your choice worth the cost? Like Santa with a wish list that cannot DISTRIBUTE ACTIVITY worksheet Principles in Action Every time we choose to do something, we give up “be satisfied, the country enters the New You take a part-time the opportunity to do something else. As you will see, even such a simple Year with a needs list that far exceeds our job after school in order Distribute the “Trade-Offs” activity worksheet decision as how late to sleep in the morning involves weighing costs revenue sources. It appears once again to save up money to (Unit 1 All-in-One, p. 22). Review the definitions of buy a car. Your and benefits. The Economics & You feature shows how scarcity and that it is time to wage the debate of guns trade-off is time for trade-off and opportunity cost. Tell students that choice can affect the ways you spend your time and what services your or butter. . . . Citizens are simultaneously money and wheels. they will analyze a political cartoon about choices community provides. confronted with funding a war abroad and dealing with rising health costs, increased Your town can afford to fix and the trade-offs involved. fuel costs and declining human services local roads or keep the library ECN10NAE3_WSAO01_0101_0022.indd Page 22 3/2/09 7:20:33 PM elhi /Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0 Trade-Offs open on mornings and at home. Name ______Class ______Date ______Saturdays – but not both. The CHAPTER Economists point out that all individuals, businesses, and large groups ANALYZING AN ECONOMIC CARTOON —Charles Bogue, “Guns or Butter,” Napa Valley Register town council trades off full 1 Trade-Offs 3 ” SECTION 2 of people—even governments—make decisions that involve trade-offs. A library service for road Economists tell us that every choice we make involves trade-offs. That is, each time we In the end, the reason for the “guns or make a decision, we give up one or more alternatives. This holds true when you are trade-off is the act of giving up one benefit in order to gain another, greater improvements. choosing to buy lunch or to go to a movie. It also applies when people decide whether to work or continue schooling. The political cartoon below takes an interesting look at benefit. Trade-offs often involve things that can be easily measured, such butter” trade-off is the same as the reason trade-offs. ◆ Study the cartoon, and then answer the questions that follow. as money, property, or time. But trade-offs may also involve values that are for any other trade-off: scarcity. not so easy to measure. Such intangibles include enjoyment, job satisfac- CheCkpointWhat are trade-offs? tion, or the feeling of well-being that comes from helping somebody. and InToon.com The Denver Post , Individuals and Trade-Offs Determining 2003 Mike Keefe, At every stage of life, you have to make trade-offs. Taking a part in the Opportunity Cost © school play prevents you from playing soccer or getting a part-time job. In most trade-offs, one of the rejected Questions to Think About

1. (a) Who are the two characters in the 3. What main point does the cartoonist A few years from now, you might decide to turn down an exciting but alternatives is more desirable than the rest. foreground? (b) What is the setting? make? (c) What does the tag on the younger 4. What trade-off did the young man make? Every decision we make involves trade-offs. That’s why they can be diffi- character’s shirt tell you about his role? trade-off the act of What was the opportunity cost? What low-paying job in favor of a less interesting job that pays better. Still later, The most desirable alternative somebody 2. (a) Who are the characters in the were the trade-offs and opportunity cost giving up one benefit in cult. Describe one decision you made this week. Identify the trade-offs background? (b) What is the younger for the people who went to college? character’s relationship to them? order to gain another, you may choose to give up a vacation in order to put more money away gives up as the result of a decision is the involved. greater benefit for your retirement. opportunity cost. Take the farmer in the

L2 Differentiate Distribute the “Trade-Offs” activity worksheet (Unit 1 All-in-One, p. 23).

ECON13_SE_FL_CH01_S02.indd 8 3/1/11 7:24:57 AM ECON13_SE_FL_CH01_S02.indd 9 3/1/11 7:25:16 AM ECN10NAE2_WSAO01_0101_0026.indd Page 26 12/25/08 11:27:35 PM user-s019/Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0 After students have completed the worksheet, ask Name Class Date How do all decisions involve trade-offs? Differentiated Resources CHAPTER SKILL ACTIVITY 1 Decision Making 2 ECN10NAE4_WSAO01_0101_0024.indd Page 24 1/29/09 3:44:10 AM users-021 /Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0024

Businesses must make many decisions. One decision is how quickly to grow. Businesses have to decide if the increased costs will provide enoughName increased______benefits. Read about ClassAll-Star ______Date ______Sporting Goods and the decisions they are making. (lesson continued on p. 11) CHAPTER L1 L2 Guided Reading and Review (Unit 1 CASE STUDY All-Star Sporting Goods has 57 very The company executives are Price and Opportunity Cost 4 successful stores in 1the West. In a year, considering plans to open new stores SECTION 2 each store has sales of about $25.3 in other states. They developed this million and earns a 10 percent profit. chart with their findings. All choices involve opportunity costs. There is always a next most desirable alternative All-in-One, p. 21) that we reject in favor of the option we choose. For many decisions, all things being equal, Number of Expected Sales Expected Profi ts Expected Sales Expected Profi ts New Stores peopleper Store, are likely Year 1to pickper theStore, same Year option 1 per when Store, faced Year 3withper the Store, same Year choices. 3 They choose 20that $21.6 option million based on their 8.5%resources and $25.5 their millionvalues. However, 9.3% circumstances change, and that affects the choices that people make. ◆ Read the case study, and then answer the SS.912.E.3.6 Draw conclusions about historical 30questions $22.2 thatmillion follow. 9.3% $26.9 million 10.7% 40 $21.8 million 9% $25.9 million 10.2% 50In recent $20.9 years,million agricultural 8% companies $24.7 millionGM plants, then, 8.5% have not always had a L2 Trade-Offs (Unit 1 All-in-One, p. 23) have used technology to develop new welcome reception. That changed in 2008, strains of plants. They do so by altering a however—at least for some buyers. Rising economic theories of economists. Questions toplant’s Think genes—the About material inside plant oil prices in recent years had led many cells that determines the plant’s traits. countries to begin processing corn not as Directions: UsingScientists the passage can make and the chart plants above, better write able the answersfood or animal feed but into ethanol, a to each question.to resistUse complete insects or sentences.infections. fuel that can be used to run vehicles. Some These biologically engineered crop farmers were happy to make the change— L4 1. (a) Compare plantsthe fi rst are year labeled after as expansion “genetically to the third year.they How could sell their corn for higher Price and Opportunity Cost (Unit 1 All-in-One, do sales and profi ts change? (b) How would you explain this change? modified,” or “GM.” Some critics call prices. However, this new use of corn had the crops “Frankenfoods,” generating another effect: it made the supply of corn frightening parallels with Frankenstein’s scarcer, raising food prices. monster. The name underscores the As a result, some businesses that had concern that these foods might not be previously stayed away from GM plants p. 24) 2. How do the expectedhealthful. sales and profi ts of the new storeshad in year to make 3 new choices. The price of compare to theEuropeans, existing 57 in stores’ particular, current have profi been ts and sales?regular corn rose so sharply that it cost Answers hostile to GM crops. Some European $100 a metric ton more than GM corn. countries banned the growth or sale of South Korean companies that process GM crops. American wheat growers, who corn had to buy the less-expensive GM sell half their crop abroad, refused to buy variety to control their costs. Even in 3. You are the CEOGM wheat.of All-Star They Sporting were afraid Goods. they (a)would What problemEurope, does companies that raised livestock L2 the companynot face? be able(b) What to sell are their the crops alternatives? if they used (c) Whatbegan option to complain that laws banning GM Decision Making skills worksheet (Unit 1 GM strains. Some companies around the animal feed could hurt them financially. Checkpoint Trade-offs are the decisions we make would you choose?world were Why? even willing to pay slightly Facing rising prices, they wanted access to higher prices for non-GM plant products. cheaper, GM alternatives.

All-in-One, p. 26) Questions to Think About to give up one benefit to gain another, greater benefit. 1. (a) How are GM foods different from 3. (a) What do you think will happen if the Copyrightregular ©foods? by Pearson (b) Education, How did Inc., some or its affiliates. people All rights reserved.price of non-GM crops continues to rise? show their opposition to GM26 foods? Why? (b) What will happen if the price of non-GM food drops? Why? 2. (a) What was the opportunity cost of non-GM food for many buyers before 4. Describe an economic choice you have 2008? (b) Why did they prefer the made or know of that was based on non- alternative? (c) What was the opportunity economic considerations. cost in 2008? (d) Why did it change? Economics & You Possible response: I bought

Chapter 1

ECON13_TE_FL_CH01_S02.indd 9 3/18/11 12:46:52 PM Chapter 1 • Section 2 Reviewing Key Terms need, p. 3 Using a Decision-Making Grid Thinking at the Margin To understand opportunity cost, want, p. 3 At times, the opportunity cost of a deci- When economists look at decisions, they review these terms: p. 4 scarcity, sion may be unclear or complicated. Using point out one more characteristic in addi- Teach Visual Glossary trade-off, p. 8 a decision-making grid like the one in tion to opportunity cost. Many decisions the Visual Glossary, opposite, can help involve adding or subtracting one unit, you determine whether you are willing to such as one hour or one dollar. From REVIEW KEY TERMS accept the opportunity cost of a choice an economist’s point of view, when you Pair students and have them write the definitions opportunity cost the most you are about to make. decide how much more or less to do, you desirable alternative given up In this particular example, a high school are thinking at the margin. of the key terms related to the understanding of as the result of a decision What is student named Karen is trying to decide To understand what it means to think at opportunity cost. whether to sleep late or get up early to the margin, think about folding a piece of Personal Finance need – something essential for survival study for a test. Because of the scarcity of paper with important notes on it to put in To see how tradeoffs time, she cannot do both. your pocket. If you fold the paper in half affect budgeting want – something people desire but that is not To help her make her decision, Karen decisions, see your Opportunity Cost? and then in half again, it can just squeeze Personal Finance necessary for survival lists the benefits of each alternative on into your pocket and will lay fairly flat. Handbook in the back of the book or visit the grid. Waking up early to study will If you continued folding it in half two or PearsonSchool.com/PHecon scarcity – the principle that limited amounts of KAREN’S DECISION-MAKING GRID probably result in her receiving a better three more times, it would fit more easily goods and services are available to meet unlimited grade. She will also receive teacher and in your pocket. But the paper would also needs and wants parental approval and experience a sense become more bulky with each additional Alternatives of personal satisfaction. fold. The question is, how many folds is trade-off – the act of giving up one benefit to gain Sleep late Wake up early to study On the other hand, Karen enjoys the best number for fitting easily into your another, greater benefit sleeping. In addition, the extra sleep would pocket and laying flat once inside? Benefits • Enjoy more sleep • Better grade on test give her more energy during the day. She • Have more energy during • Teacher and parental approval APPLY would have to give up these benefits if she Cost/Benefit Analysis the day • Personal satisfaction Deciding by thinking at the margin is just Ask How does each key term apply to Karen’s decided to get up earlier. Benefits forgone • Better grade on test • Enjoy more sleep like making any other decision. Decision situation? (Need: sleep; Want: better grade; Scarcity: • Teacher and parental approval • Have more energy during Making the Decision makers have to compare the opportu- time; Trade-off: gives up sleep or her grade.) • Personal satisfaction the day Karen is a practical person. After consid- nity costs and the benefits—what they will sacrifice and what they will gain. Opportunity cost Extra study time Extra sleep time ering the opportunity cost of each Ask What alternatives are Karen and the family alternative, she decides that waking up This decision-making process is sometimes in the cartoon choosing between? (Karen: sleep, early to study offers her the most desirable called cost/benefit analysis. grades; cartoon: money for dinner, ease of driving). Opportunity cost is not just money, but any benefit you give up. To determine the benefits. She knows that she is giving up To make rational, or sensible, deci- If Karen decided to sleep late, what is her opportunity cost of any alternative, you must first identify the benefits you will gain and the the pleasure of more sleep and the extra sions at the margin, you must weigh benefits you will give up.What is Karen’s opportunity cost if she decides to sleep late? marginal costs against marginal benefits. opportunity cost? (study time) energy it would provide. But she is willing to accept this opportunity cost. The marginal cost is the extra cost of thinking at the margin L1 L2 Differentiate Have students create a If Karen faced other decisions with adding one unit, whether it be sleeping an extra hour or building one extra house. the process of deciding other opportunity costs, she might choose whether to do or use one decision-making grid for a situation from their own The marginal benefit is the extra benefit In this cartoon, scarcity of an important differently. What if the choice was between additional unit of some life. Help them use the grid to understand that there resource resource—money—has forced the sleeping late and getting up early to have of adding the same unit. As long as the is an opportunity cost to each decision. family to make a strange decision. What breakfast? What if her decision to sleep marginal benefits exceed the marginal decision has the family made? What is late or study was on a Saturday rather costs, it pays to add more units. L4 Differentiate Distribute the “Price and the opportunity cost of this decision? cost/benefit analysis a decision-making Opportunity Cost” worksheet (Unit 1 All-in-One, than on a school day? With each different Decision-Making at the Margin set of alternatives, the possible benefits process in which you p. 24). Tell students that they will read a case study Look again at the example of Karen’s compare what you will and opportunity costs change as well. decision on how late to sleep. The decision- sacrifice and gain by a about genetically modified crop plants and how One thing does not change, though. making grid in the Visual Glossary used an specific action changes in needs and wants changed trade-offs We always face an opportunity cost. As “all or nothing” approach. Either Karen economists say, “Choosing is refusing.” and opportunity costs for people and businesses. was going to wake up early to study, or marginal cost the extra When we select one alternative, we must Have students read the case study and answer the she was going to sleep late and not study cost of adding one unit sacrifice at least one other alternative and at all that morning. questions. online its benefits. In reality, Karen could have decided To expand your understanding of marginal benefit the this and other key economic terms, CheCkpoint Why does every choice from among several options rather than extra benefit of adding visit PearsonSchool.com/PHecon involve an opportunity cost? just two. She could have decided to get up one unit All print resources are available on the Teacher’s Resource 10 Chapter 1 SeCtion 2 11 Library CD-ROM and online at www.PearsonSchool.com/PHecon.

ECON13_SE_FL_CH01_S02.indd 10 11/9/11 9:10:06 PM ECON13_SE_FL_CH01_S02.indd 11 11/9/11 9:10:20 PM

Answers Decision-Making Grid extra study time Cartoon The family decided to save money on gas by pushing the car halfway to the restaurant. The opportunity cost is the luxury of riding in the car all the way.

10 Unit 1

ECON13_TE_FL_CH01_S02.indd 10 11/10/11 8:40:51 AM Reviewing Key Terms need, p. 3 Using a Decision-Making Grid Thinking at the Margin Chapter 1 • Section 2 To understand opportunity cost, want, p. 3 At times, the opportunity cost of a deci- When economists look at decisions, they review these terms: p. 4 scarcity, sion may be unclear or complicated. Using point out one more characteristic in addi- trade-off, p. 8 a decision-making grid like the one in tion to opportunity cost. Many decisions APPLY UNDERSTANDING the Visual Glossary, opposite, can help involve adding or subtracting one unit, Review the meaning of thinking at the margin with you determine whether you are willing to such as one hour or one dollar. From students. Point out that when they make decisions, it accept the opportunity cost of a choice an economist’s point of view, when you opportunity cost the most you are about to make. decide how much more or less to do, you is not usually an all-or-nothing situation. Ask students desirable alternative given up In this particular example, a high school are thinking at the margin. to look back at their answers to the Bellringer. Ask If as the result of a decision What is student named Karen is trying to decide To understand what it means to think at you had a little more time or money, how would whether to sleep late or get up early to the margin, think about folding a piece of Personal Finance your decision have changed? Discuss how students study for a test. Because of the scarcity of paper with important notes on it to put in To see how tradeoffs time, she cannot do both. your pocket. If you fold the paper in half affect budgeting make their daily decisions based on marginal thinking. To help her make her decision, Karen decisions, see your Opportunity Cost? and then in half again, it can just squeeze Personal Finance lists the benefits of each alternative on into your pocket and will lay fairly flat. Handbook in the back personal finance activity the grid. Waking up early to study will of the book or visit If you continued folding it in half two or PearsonSchool.com/PHecon Tell students that they can learn more about KAREN’S DECISION-MAKING GRID probably result in her receiving a better three more times, it would fit more easily how trade-offs affect spending decisions by reading grade. She will also receive teacher and in your pocket. But the paper would also parental approval and experience a sense become more bulky with each additional the Budgeting section, starting on page PF4 Alternatives of personal satisfaction. fold. The question is, how many folds is in the Personal Finance Handbook, and by Sleep late Wake up early to study On the other hand, Karen enjoys the best number for fitting easily into your completing the activity worksheet (Personal Finance sleeping. In addition, the extra sleep would pocket and laying flat once inside? All-in-One, p. 32). Benefits • Enjoy more sleep • Better grade on test give her more energy during the day. She • Have more energy during • Teacher and parental approval would have to give up these benefits if she Cost/Benefit Analysis the day • Personal satisfaction DECISION MAKING decided to get up earlier. Deciding by thinking at the margin is just Benefits forgone • Better grade on test • Enjoy more sleep like making any other decision. Decision Distribute the “Decision Making” skills worksheet • Teacher and parental approval • Have more energy during Making the Decision makers have to compare the opportu- (Unit 1 All-in-One, p. 25). Tell students that they will • Personal satisfaction the day Karen is a practical person. After consid- nity costs and the benefits—what they will sacrifice and what they will gain. analyze thinking at the margin. Opportunity cost Extra study time Extra sleep time ering the opportunity cost of each This decision-making process is sometimes alternative, she decides that waking up L2 Differentiate Distribute the “Decision Making” called cost/benefit analysis. early to study offers her the most desirable skills worksheet (Unit 1 All-in-One, p. 26). Tell Opportunity cost is not just money, but any benefit you give up. To determine the benefits. She knows that she is giving up To make rational, or sensible, deci- opportunity cost of any alternative, you must first identify the benefits you will gain and the the pleasure of more sleep and the extra sions at the margin, you must weigh students that they will complete a decision-making benefits you will give up.What is Karen’s opportunity cost if she decides to sleep late? energy it would provide. But she is willing marginal costs against marginal benefits. chart and answer questions about it. to accept this opportunity cost. The marginal cost is the extra cost of If Karen faced other decisions with adding one unit, whether it be sleeping an thinking at the margin EXTEND extra hour or building one extra house. the process of deciding other opportunity costs, she might choose whether to do or use one The marginal benefit is the extra benefit Instruct students to research a recent spending In this cartoon, scarcity of an important differently. What if the choice was between additional unit of some resource resource—money—has forced the sleeping late and getting up early to have of adding the same unit. As long as the decision in their community or state. Have students family to make a strange decision. What breakfast? What if her decision to sleep marginal benefits exceed the marginal analyze the decision using a decision-making grid. decision has the family made? What is late or study was on a Saturday rather costs, it pays to add more units. the opportunity cost of this decision? cost/benefit analysis than on a school day? With each different Decision-Making at the Margin a decision-making Guiding Question Wrap up set of alternatives, the possible benefits process in which you Look again at the example of Karen’s compare what you will Have students return to the section Guiding Question. and opportunity costs change as well. decision on how late to sleep. The decision- sacrifice and gain by a Review the completed graphic organizer and clarify One thing does not change, though. making grid in the Visual Glossary used an specific action We always face an opportunity cost. As “all or nothing” approach. Either Karen any misunderstandings. Have a wrap up discussion economists say, “Choosing is refusing.” was going to wake up early to study, or marginal cost the extra about how opportunity cost affects decision making. When we select one alternative, we must she was going to sleep late and not study cost of adding one unit sacrifice at least one other alternative and at all that morning. online its benefits. In reality, Karen could have decided To expand your understanding of marginal benefit the Assess and Remediate this and other key economic terms, CheCkpoint Why does every choice from among several options rather than extra benefit of adding visit PearsonSchool.com/PHecon involve an opportunity cost? just two. She could have decided to get up one unit L3 L2 Collect the ”Trade-Offs” and “Decision

10 Chapter 1 SeCtion 2 11 Making” worksheets and assess student understanding of opportunity cost and decision making at the margin. L4 Collect the “Price and Opportunity Cost” ECON13_SE_FL_CH01_S02.indd 10 11/9/11 9:10:06 PM ECON13_SE_FL_CH01_S02.indd 11 11/9/11 9:10:20 PM worksheets and assess student understanding of analysis helps people make economic trade-offs. Virtual Economics decisions. L3 L3 Differentiate Section 2 Assessment Comparing Marginal Benefits and Lesson Title The Economic L3 Give Section Quiz A (Unit 1 All-in-One, p. 27). Way of Thinking: Costs Use the following lesson from L2 Give Section Quiz B (Unit 1 All-in-One, p. 28). Three Activities the NCEE Virtual Economics CD-ROM to Demonstrate (Assess and Remediate continued on p. 12) to help students understand marginal Marginal analysis. Click on Browse Economics Analysis Lessons, specify grades 9–12, and use Type of Activity Simulation Answer the key words economic way. Complexity High Checkpoint Every choice has an opportunity In this activity, students will take part in Time 60 minutes cost because every decision includes at least one a simulation to illustrate how marginal alternative that is the next most desirable. NCEE Standards 1, 3

Chapter 1 11

ECON13_TE_FL_CH01_S02.indd 11 11/10/11 8:41:19 AM Chapter 1 • Section 2 each extra hour of studying and compare Figure 1.1 Decision Making at the Margin it to the marginal benefit. In Figure 1.1, we can see that one hour of studying Have students complete the Self-Test Online and means an opportunity cost of an hour of Options Benefit Opportunity Cost continue their work in the Essential Questions sleep, while the probable benefit would be 1st hour of extra Grade of C on test One hour of sleep passing the test with a C. Two hours of Journal. study time studying means losing two hours of sleep and perhaps getting a B. When Karen REMEDIATION AND SUGGESTIONS 2nd hour of extra Grade of B on test 2 hours of sleep gives up three hours of sleep, however, the study time Use the chart below to help students who are probable benefit rises only slightly, to a 3rd hour of extra Grade of B+ on test 3 hours of sleep grade of B+. struggling with content. study time Karen concludes that the marginal cost of losing three hours of sleep is no longer WEAKNESS REMEDIATION worth the marginal benefit because her chart SKILLS grade will improve only slightly. Based on Defining key terms Have students use the Compare this chart to the one in the Visual Glossary. By comparing her cost-benefit analysis, Karen decides to opportunity costs and benefits of each extra hour, Karen can decide (Questions 3, 4, 5, 6) interactive Economic how much sleep is the right amount. awaken two hours earlier. Dictionary Online. 1. What is the opportunity cost of one extra hour of sleep? What is Like opportunity cost, thinking at the the benefit? margin applies not just to individuals, but Understanding Draw a decision-making 2. At what point is Karen paying an added cost with little added to businesses and governments as well. benefit? opportunity cost grid on the board similar Employers think at the margin when they decide how many extra workers to hire. (Questions 1, 2, 8, 10) to the one in the Visual Legislators think at the margin when one, two, or three hours earlier. Making Glossary. With students, deciding how much to increase spending a decision about each extra hour would on a government program. complete the grid and involve thinking at the margin. lead them to identify To make a decision at the margin, CheCkpointHow can a cost/benefit the opportunity cost of Karen should look at the marginal cost of analysis help people make decisions?

each alternative. LA.1112.1.6.1, LA.1112.2.2.2, SS.912.E.1.7, SS.912.E.2.2, SS.912.E.3.6 To continue to build a Explaining thinking at Reteach using the Skills response to the Essential the margin (Questions worksheet. Journal Question, go to your SECTION 2 ASSESSMENT Essential Questions Journal. 5, 6, 9) SECTION Assessment Guiding Question Critical Thinking Math Skills 1. Use your completed concept web 7. Give Examples Give two examples 10. You have a part-time job where you to answer this question: How does of a decision that your school or local work 10 hours a week and earn $6 opportunity cost affect decision government might have to make. an hour. A friend tells you about making? Explain how each decision involves another job, at a restaurant, where 2. Extension Identify the opportunity trade-offs. the pay is only $4 an hour, but in cost of the most recent consumer 8. Analyze Identify a possible oppor- 10 hours of work you can earn as purchase you made. Explain what tunity cost for each of the following much as $25 in tips. Calculate the you gave up and why you chose to choices: (a) studying for a test on a probable hourly pay rate for each purchase the item you did. Saturday afternoon, (b) using all the job. What is the opportunity cost of Answers money you received for your birth- taking the restaurant job? Would you change jobs? Why or why not? Key Terms and Main Ideas day to pay for downloading songs, (c) spending four hours playing a Visit PearsonSchool.com/PHecon Graph Skills 1. One less hour of study time and 3. Why do all economic decisions video game on a Tuesday night, for additional math help. involve trade-offs? a grade of C; 1 hour of sleep 2. third hour of study (d) having four slices of pizza for compared to second hour of study costs Karen a full 4. How does the phrase “guns or lunch. butter” express the principle of 9. Make Decisions What marginal hour of sleep but increases her grade a partial step trade-offs? costs and benefits might a business from a B to B+ 5. Why do many economic decisions owner have to consider when trying involve thinking at the margin? to decide whether to hire one, two, Checkpoint It shows when an added unit of cost 6. Why is it important to compare or three additional workers? no longer provides enough benefit to be worthwhile. marginal costs to marginal benefits?

LA.1112.1.6.1, LA.1112.2.2.2, SS.912.E.1.7, 12 What Is EconomIcs? SS.912.E.2.2, SS.912.E.3.6 Assessment Answers ECON13_SE_FL_CH01_S02.indd 12 3/1/11 7:26:14 AM 1. Possible response: It clarifies exactly what 5. Many decisions involve whether to add an important test; (d) having a sandwich people give up when choosing one option. or subtract one unit of a resource—a and a fruit salad 2. Possible response: I chose to buy an weighing of costs versus benefits. 9. how much added output each worker expensive pair of designer jeans, but then I 6. to ensure that benefits are proportional to would provide, compared to cost of added had to buy less-expensive sneakers. resources used wages 3. because resources are limited; using them 7. Possible responses: Building a park 10. The opportunity cost of the restaurant job one way makes them unavailable for other (trade-offs: hiring more police officers is the potential loss of $20 a week, since uses or lowering taxes); providing services to tips are not guaranteed. Students may or 4. Often governments have to choose elderly (trade-offs: buying school books or may not change jobs, depending on how between military and domestic spending repaving the streets) they feel about the risk. because of limited revenues. 8. Possible responses: (a) spending time with friends; (b) seeing a movie; (c) studying for

12 Unit 1

ECON13_TE_FL_CH01_S02.indd 12 3/8/11 11:01:00 PM Chapter • Section 3 SECTION 3 Production Possibilities Curves Guiding Question economic dictionary NGSSS Guiding Question As you read the section, look for How does a nation LA.1112.1.6 Use multiple strategies to develop the definitions of these Key Terms: How does a nation decide what vocabulary. decide what and how • production possibilities curve MA.912.A.2 Draw and interpret graphs of much to produce? • production possibilities frontier and how much to produce? relations. Copy this concept web and fill it in as • efficiency SS.912.E.1.2 Analyze production possibilities you read. Add more ovals if necessary. curves to explain choice. • underutilization • law of increasing costs Used to analyze Get Started SS.912.E.2.3 Research the contributions of trade-offs key individuals of various backgrounds in the Production development of the U.S. Compares two Possibilities goods or Curve Production possibilities services Used to analyze trade-offs frontier shows maximum possible output

Compares Production Points inside line two goods or Possibilities show underutilization services Curve W Economics and You Your class decides to sponsor a community breakfast as a fundraiser. Can you make more money by serving eggs Curve to line or pancakes? Should you offer both? To decide, you’ll have to look at the Shift to right shows shows law of economic growth Shift to left shows cost of ingredients, the number of workers you have, and the size of the increasing costs (more resources) economic decline kitchen. Also, does it take more time to scramble eggs or to flip pancakes? (fewer resources) What you decide will affect how much money you make. Nations face similar decisions about what to produce. For nations, however, the consequences of these decisions can be far more serious. Principles in Action To decide what and how much to produce, econo- LESSON GOALS mists use a tool known as a production possibilities curve. You will see Students will: how an imaginary country uses this tool to decide between producing two very different products: shoes and watermelons. • Know the Key Terms. Production Possibilities • Interpret production possibilities curves. Economists often use graphs to analyze the choices and trade-offs that • Analyze a transparency to understand changes in people make. Why? Because graphs help us see how one value relates to production possibilities curves. another value. A production possibilities curve is a graph that shows alternative ways to use an economy’s productive resources. The axes of the • Discuss the law of increasing costs. graph can show categories of goods and services, such as farm goods and • Research and debate government policies to factory goods or capital goods and consumer goods. The axes can also promote advances in technology. display any pair of specific goods or services, such as hats on one axis and shoes on the other. BEFORE CLASS Drawing a Production Possibilities Curve Students should read the section for homework To draw a production possibilities curve, an economist begins by deciding which goods or services to examine. In this example, we will look at a before coming to class. fictional country called Capeland. Government economists in Capeland Have students complete the graphic organizer in must decide whether to use the nation’s scarce resources to manufac- the Section Opener as they read the text. As an ture shoes or to grow watermelons. The economists determine that, if production Capeland used all of its resources to produce only shoes, it could produce possibilities curve alternative activity, have students complete the 15 million pairs of shoes. At the other extreme, if Capeland used all of its a graph that shows Guided Reading and Review worksheet. alternative ways to use resources to produce only watermelons, it could produce 21 million tons an economy’s productive (Unit 1 All-in-One, p. 29) of watermelons. resources L1 L2 ELL LPR Differentiate Have students Chapter 1 SeCtION 3 13 complete the Guided Reading and Review worksheet. (Unit 1 All-in-One, p. 30)

ECON13_SE_FL_CH01_S03.indd 13 3/1/11 7:26:57 AM NGSSS Focus on the Basics Students need to come away with the following understandings: NGSSS

FACTS: • Production possibilities curves show alternative ways to use resources. LA.1112.1.6 Use multiple strategies to develop vocabulary. • Production possibilities curves show how efficiently an economy uses resources, MA.912.A.2 Draw and interpret graphs of relations. results of economic growth, and costs of each production choice. • Adopting new SS.912.E.1.2 Analyze production possibilities curves to explain technology can improve efficiency and create economic growth. choice. GENERALIZATION: Production possibilities curves are important tools for decision SS.912.E.2.3 Research the contributions of key individuals of makers to make the most efficient use of resources. various backgrounds in the development of the U.S.

Chapter 13

ECON13_TE_FL_CH01_S03.indd 13 3/8/11 11:02:00 PM Chapter • Section 3 Growth efficiency the use of Figure 1.2 Production Possibilities Curve Efficiency, Growth, and Cost resources in such a Production possibilities curves give useful A production possibilities curve is a way as to maximize the information. They can show how efficient an snapshot. It reflects current production output of goods and Graph SkillS services BELLRINGER economy is, whether an economy is growing, possibilities as if a country’s resources The table shows six dif- 25 were frozen in time. In the real world, Tell students to imagine that they and two friends ferent combinations of Watermelons Shoes and the opportunity cost of producing more however, available resources are constantly watermelons and shoes (millions of tons) (millions of pairs) of one good or service. underutilization the are planning a party for the class. Have them plan that Capeland could pro- 20 changing. If the quantity or quality of use of fewer resources who will do what to prepare for the party. duce using all of its factor 0 15 Efficiency land, labor, or capital changes, then the than an economy is resources. These figures e curve will move. For example, a wave of capable of using have been used to create 8 14 15 A production possibilities frontier repre- a a production possibilities sents an economy working at its most immigration may increase a nation’s labor curve. 14 12 efficient level. Efficiency is the use of supply. This rise in a factor of production (millions of pairs) 1. How much watermelon 10 b increases the maximum amount of goods Teach 18 9 resources in such a way as to maximize the can Capeland produce the nation can produce. Shoes d output of goods and services. However, if they are making 9 20 5 5 sometimes economies operate inefficiently. When an economy grows, economists online million pairs of shoes? To present this topic using What will the opportu- For example, suppose some workers were say that the production possibilities curve digital resources, use the lecture notes on nity cost be if Capeland 21 0 c laid off. The farms or factories where they has “shifted to the right.” To see such a increases shoe produc- 0 5 10 2015 25 worked would produce fewer goods. shift, look at line e in Figure 1.2. Notice www.PearsonSchool.com/PHecon. tion to 12 million? KEY Any point inside the production possi- that the possible output of both shoes and 2. Why would production Watermelons (millions of tons) a. No watermelons, all possible shoes watermelons has increased at each point REVIEW BELLRINGER at point d in the graph bilities frontier indicates underutilization, b. A production possibilities frontier d. A point of underutilization or the use of fewer resources than the along the line. SS.912.E.2.3 on the right represent Research the c. No shoes, all possible watermelons e. Future production possibilities frontier Ask Would you assign every person to make an underutilization of economy is capable of using. At Point d in However, when a country’s production contributions of decorations? (No; then there would be no one resources? Figure 1.2, Capeland is growing 5 million tons capacity decreases, the curve shifts to the key individuals of watermelons and making 8 million pairs left. A decrease could occur, for example, of various to make food). Then have students volunteer their backgrounds in online of shoes. This is inefficient because it is less when a country goes to war and loses part the development answers. Point out that students divided the labor than the maximum possible production. of its land as a result. of the U.S. For an animated version and resources to efficiently finish the job. They of this graph, visit used the concept of a production possibilities curve PearsonSchool.com/PHecon without realizing it.

CHECK UNDERSTANDING Steven Levitt SS.912.E.1.2 The Capeland economists use this infor- both shoes and watermelons. Any spot Analyze production mation to create a production possibilities on that line represents a point at which I just wander through life looking for anything Remind students that all resources are scarce. A possibility curves “ production possibilities curve helps determine the to explain choice. curve (Figure 1.2). The vertical axis of the Capeland is using all of its resources to that interests me,” best way to allocate these scarce resources. SS.912.E.1.15 graph represents how many millions of pairs produce a maximum combination of those says economist Steve Levitt. “And every once in a while I stumble Describe the risk of shoes Capeland’s factories can produce. two products. onto something that turns into a research idea.” This wide curiosity has led him to publish books and articles on topics from illegal Direct students’ attention to Figure 1.2 in their and return profiles The horizontal axis shows how many of various Trade-Offs drug use to sumo wrestling. Levitt is one of a new generation of textbook. Call on volunteers to identify the investment options. millions of tons of watermelons Capeland’s economists who are using economic principles such as farmers can grow. At Point a, Capeland Each point on the production possibili- scarcity and trade-offs to explore all human behavior. production possibilities frontier. (the red line b is producing 15 million pairs of shoes but ties frontier reflects a trade-off. Near the When he was still barely in his early forties, Levitt was connecting points a and c) Ask What level of top of the curve, factories produce more already a full professor at a major university. Brilliant but no watermelons. At Point c, Capeland is unorthodox, Levitt has shown a rare ability to observe human production does this line represent? (maximum producing 21 million tons of watermelons shoes, but farms grow fewer watermelons. interactions and create mathematical models that predict production of both shoes and watermelons, using but no shoes. Further down the curve, farms grow more future outcomes. He has done ground-breaking work on There is a third, more likely alternative. watermelons, but factories make fewer important “real world” issues, including: all the nation’s resources) Make sure that students The citizens of Capeland can use their pairs of shoes. • Does the prison system deter criminal behavior? understand that the values in the table were used to resources to produce both shoes and water- These trade-offs are necessary because • Will adding more police lower the local crime rate? factors of production are scarce. Using • What strategies work best to combat drunk driving? plot the production possibilities frontier. melons. The table shows four different ways Steven Levitt land, labor, and capital to make one This innovative thinker has an ambition that may seem that Capelanders could use their resources unusual for an economist. “I’d like to put together a set of Born: May 29, 1967, in Minneapolis, MN L1 L2 Differentiate Review each label on production product means that fewer resources are ELL possibilities frontier to produce both shoes and watermelons. tools that lets us catch terrorists,” he says. For Levitt, Education: B.A. in Economics the graph in Figure 1.2, asking questions to check a line on a production Using the made-up data from the table, left to make something else. catching terrorists is a matter of finding the right data. from Harvard; Ph.D. in Economics possibilities curve that we can plot points on the graph. This line, Critical Thinking: How can the concept of scarcity help explain from M.I.T. students’ understanding, such as What does point shows the maximum CheCkpointHow do production possi- is called the production possibilities frontier, a wide range of human behavior? Claim to Fame: Co-author of the best d mean? (underutilization, or a point where the possible output an bilities curves show alternative uses of economy can produce shows combinations of the production of resources? selling book Freakonomics country is not producing as much as it could be) How many shoes and watermelons are produced at point a? (15 million pairs of shoes, no watermelons) 14 What Is EconomIcs? Chapter 1 SeCtION 3 15

online Have students review the Action Graph animation for a step-by-step look at a production ECON13_SE_FL_CH01_S03.indd 14 3/1/11 7:27:06 AM ECON13_SE_FL_CH01_S03.indd 15 3/1/11 7:27:16 AM possibilities curve. ECN10NAE2_WSAO01_0101_0032.indd Page 32 12/25/08 11:27:57 PM user-s019/Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0

Name Class Date

CHAPTER Differentiated Resources STUDENT ACTIVITY 1 Governments Promote Technology 2 ECN10NAE2_WSAO01_0101_0030.inddSECTION 3 Page 30 12/25/08 11:27:50 PM user-s019/Volumes/109/PHS00048/AIO_indd%0/Unit_01/Chapter_01/ECN10NAE_WSAO01_0101_0

New technology can make the production of a good or service more efficient and less expensive. Governments support programs that Name ______Class ______Date ______teach people to use and develop new technologies. The skills people gain from these programs help the economy grow and lead to CHAPTER L1 L2 Guided Reading and Review increased prosperity. GUIDED READING AND REVIEW 1 Production Possibilities Curves 2 Questions toS ThinkECTION 3About Directions: Work with a partner. Read the examples of government (Unit 1 All-in-One, p. 30) actions or plansA. below. As AnswerYou Read this question for each example: How will the country’sDirections: economy As you benefit read Section from the 3, completeprogram? the Use statements about complete sentences.the graph. Then apply your knowledge to the Guiding Question: 1. The government in India encouraged schools to make blogging part of the school curriculum. How does a nation decide what and how much L3 to produce? Kitchen Challenge (Simulation Activities, Production Possibilities Curve for Watermelon vs. Shoe Production in Capeland Answers 25 20 2. The South African government plans to educate people about the Chapter 1) value of patents. 15 10

5 Graph Skills 1. 18 million tons of watermelons; Shoes (millions of pairs) 0 0 5 10 15 20 25 Watermelons (millions of tons) 3. The U. S. government plans to create summer programs for L2 Governments Promote Technology (Unit 1 teachers to improve their math and science skills. 4 million fewer tons of watermelons 2. At point d, 1. The products being compared on this graph are and . 2. The curve is called a All-in-One, p. 32) . 4. The Chinese government invested in a new center for the study Capeland does not produce as much of either of solar technology. 3. This curve shows different ways Capeland’s can be used. 4. A production possibilities curve can tell about , watermelons or shoes as it could. , and . B. Copyright Reviewing © by Pearson Education,Key Terms Inc., or its affiliates. All rights reserved. 32 SS.912.E.1.2 Analyze production possibility Directions: Define the following terms in your own words. 5. efficiency Checkpoint Each point on a production possibilities 6. underutilization curves to explain choice. 7. law of increasing costs

Copyright © by Pearson Education, Inc., or its affiliates. All rights reserved. frontier shows how much of two goods can be SS.912.E.1.15 Describe the risk and return 30 produced with the same resources. profiles of various investment options.

14 Unit 1

ECON13_TE_FL_CH01_S03.indd 14 3/18/11 12:47:45 PM Growth efficiency the use of Chapter • Section 3 Figure 1.2 Production Possibilities Curve Efficiency, Growth, and Cost resources in such a Production possibilities curves give useful A production possibilities curve is a way as to maximize the information. They can show how efficient an snapshot. It reflects current production output of goods and Graph SkillS services economy is, whether an economy is growing, possibilities as if a country’s resources ANALYZE The table shows six dif- 25 were frozen in time. In the real world, ferent combinations of Watermelons Shoes and the opportunity cost of producing more To practice analyzing production possibilities curves, however, available resources are constantly watermelons and shoes (millions of tons) (millions of pairs) of one good or service. underutilization the that Capeland could pro- 20 changing. If the quantity or quality of use of fewer resources display the transparency “Production Possibilities duce using all of its factor 0 15 Efficiency land, labor, or capital changes, then the than an economy is Curve” (Color Transparencies, 1.a). Ask What do resources. These figures e curve will move. For example, a wave of capable of using have been used to create 8 14 15 A production possibilities frontier repre- the red and blue lines represent? (production a a production possibilities sents an economy working at its most immigration may increase a nation’s labor possibilities frontier and future production curve. 14 12 efficient level. Efficiency is the use of supply. This rise in a factor of production (millions of pairs) 1. How much watermelon 10 b increases the maximum amount of goods possibilities frontier) How do the values on the 18 9 resources in such a way as to maximize the can Capeland produce the nation can produce. Shoes d output of goods and services. However, blue line compare with those on the red line? if they are making 9 million pairs of shoes? 20 5 5 sometimes economies operate inefficiently. When an economy grows, economists (The future production values are higher.) What What will the opportu- For example, suppose some workers were say that the production possibilities curve does that mean? (The nation can produce more nity cost be if Capeland 21 0 c laid off. The farms or factories where they has “shifted to the right.” To see such a increases shoe produc- 0 5 10 2015 25 worked would produce fewer goods. shift, look at line e in Figure 1.2. Notice jeans or T-shirts.) What factors might cause that tion to 12 million? KEY Any point inside the production possi- that the possible output of both shoes and increased production? (immigration, updated 2. Why would production Watermelons (millions of tons) a. No watermelons, all possible shoes at point d in the graph bilities frontier indicates underutilization, watermelons has increased at each point technology, or more skilled workers) b. A production possibilities frontier d. A point of underutilization or the use of fewer resources than the along the line. SS.912.E.2.3 on the right represent Research the c. No shoes, all possible watermelons e. Future production possibilities frontier L4 an underutilization of economy is capable of using. At Point d in However, when a country’s production contributions of Differentiate Have students research the resources? Figure 1.2, Capeland is growing 5 million tons capacity decreases, the curve shifts to the key individuals choices that car manufacturers are making, as of watermelons and making 8 million pairs left. A decrease could occur, for example, of various backgrounds in customers demand more fuel-efficient cars. Some online of shoes. This is inefficient because it is less when a country goes to war and loses part the development companies are investing in the design of smaller cars than the maximum possible production. of its land as a result. of the U.S. For an animated version of this graph, visit with gas engines. Others are focusing on developing PearsonSchool.com/PHecon solar-powered or electric cars. Have students write a brief essay explaining how a car company could use quantitative methods, such as production possibilities Steven Levitt SS.912.E.1.2 The Capeland economists use this infor- both shoes and watermelons. Any spot curves, to help them determine the trade-offs and Analyze production mation to create a production possibilities on that line represents a point at which I just wander through life looking for anything possibility curves “ opportunity costs involved in their choices. to explain choice. curve (Figure 1.2). The vertical axis of the Capeland is using all of its resources to that interests me,” SS.912.E.1.15 graph represents how many millions of pairs produce a maximum combination of those says economist Steve Levitt. “And every once in a while I stumble INTERPRET Describe the risk of shoes Capeland’s factories can produce. two products. onto something that turns into a research idea.” This wide curiosity has led him to publish books and articles on topics from illegal and return profiles The horizontal axis shows how many Review the meaning of the law of increasing costs of various Trade-Offs drug use to sumo wrestling. Levitt is one of a new generation of with students. Then direct students to Figure 1.3 in investment options. millions of tons of watermelons Capeland’s economists who are using economic principles such as farmers can grow. At Point a, Capeland Each point on the production possibili- scarcity and trade-offs to explore all human behavior. their textbook. Ask What happens as more land When he was still barely in his early forties, Levitt was is producing 15 million pairs of shoes but ties frontier reflects a trade-off. Near the is used for farming? (Less productive land is used.) no watermelons. At Point c, Capeland is top of the curve, factories produce more already a full professor at a major university. Brilliant but unorthodox, Levitt has shown a rare ability to observe human Is this an efficient use of resources? (No, the land producing 21 million tons of watermelons shoes, but farms grow fewer watermelons. interactions and create mathematical models that predict but no shoes. Further down the curve, farms grow more future outcomes. He has done ground-breaking work on could be used for something else.) There is a third, more likely alternative. watermelons, but factories make fewer important “real world” issues, including: L3 Simulation Activities In “Kitchen Challenge” The citizens of Capeland can use their pairs of shoes. • Does the prison system deter criminal behavior? resources to produce both shoes and water- These trade-offs are necessary because • Will adding more police lower the local crime rate? have students determine how to use available factors of production are scarce. Using • What strategies work best to combat drunk driving? melons. The table shows four different ways Steven Levitt resources to plan a fund-raising breakfast. land, labor, and capital to make one This innovative thinker has an ambition that may seem that Capelanders could use their resources unusual for an economist. “I’d like to put together a set of Born: May 29, 1967, in Minneapolis, MN production product means that fewer resources are possibilities frontier to produce both shoes and watermelons. tools that lets us catch terrorists,” he says. For Levitt, Education: B.A. in Economics (lesson continued on p. 17) a line on a production Using the made-up data from the table, left to make something else. catching terrorists is a matter of finding the right data. from Harvard; Ph.D. in Economics possibilities curve that we can plot points on the graph. This line, Critical Thinking: How can the concept of scarcity help explain from M.I.T. CheCkpointHow do production possi- shows the maximum a wide range of human behavior? SS.912.E.2.3 Research the contributions of key possible output an is called the production possibilities frontier, bilities curves show alternative uses of Claim to Fame: Co-author of the best economy can produce shows combinations of the production of resources? selling book Freakonomics individuals of various backgrounds in the development of the U.S.

14 What Is EconomIcs? Chapter 1 SeCtION 3 15

ECON13_SE_FL_CH01_S03.indd 14 3/1/11 7:27:06 AM ECON13_SE_FL_CH01_S03.indd 15 3/1/11 7:27:16 AM Background Note Steven Levitt Students might be interested to know that Levitt—and Freakonomics coauthor Stephen J. Dubner—maintain a Freakonomics blog at the Web site http://freakonomics.blogs.nytimes.com. Postings have addressed such topics as a possible link between the decline of grocery stores and the rise of obesity, the link between a member of the House of Representatives having a daughter and their voting pattern on women’s issues, and the use of statistical analysis in professional basketball. Answer Critical Thinking Possible answer: People lack many kinds of resources, including time and energy, as well as money and skills, that affect the decisions they make.

Chapter 15

ECON13_TE_FL_CH01_S03.indd 15 3/8/11 11:02:29 PM Chapter • Section 3 Cost grows more watermelons, the sacrifice in law of increasing terms of shoes increases. Eventually, it costs costs an economic We can also use production possibilities principle which states graphs to determine the cost involved in Capeland an additional 5 million pairs of that as production a decision. Remember that cost does not shoes to increase watermelon production shifts from making Teach Case Study by only 1 million tons. one good or service to necessarily mean money. To an economist, another, more and more cost always means opportunity cost. Economists explain these increasingly resources are needed SUMMARIZE AND EXPLAIN Gross Value of Manufacturing Looking at the table in Figure 1.2, expensive trade-offs through the law of to increase production in Vietnam we can see that the opportunity cost of increasing costs. This principle states that of the second good or Have the students explain why companies are service 450 moving from producing no watermelons as production shifts from making one item looking to outsource operations to developing 400 to producing 8 million tons of water- to another, more and more resources are 350 countries. Ask Why are automakers moving melons is 1 million pairs of shoes. In necessary to increase production of the 300 second item. Therefore, the opportunity high-skilled jobs into low-cost countries? 250 other words, in order to produce 8 million (in trillions of dong) tons of watermelons, Capeland had to cost increases. (Automakers are trying to save money. Assembly 200 150 sacrifice the opportunity to produce Why does the cost increase? According plants have been in low-cost countries for years, but 100 1 million pairs of shoes. In the same way, to Figure 1.3, it is because some resources now automakers are trying to cut additional costs 50 if Capeland later decides to increase water- are better suited for use in farming while

Current prices 0 melon production from 8 million tons others are more appropriate for manu- Simulation Activity by moving more jobs into undeveloped areas where 2002 2003 2004 2005 2006 to 14 million tons—an increase of only facturing. Moving resources from factory Kitchen Challenge they can get cheaper labor). SOURCE: International Monetary Fund, Vietnam Statistical You may be asked Appendix, December 2007 6 million tons—it costs 2 million pairs to farm production means that farmers to take part in a Have the students figure out how far the automakers of shoes. In the first step, those 8 million must use resources that are not as suit- role-playing game tons of watermelons cost 1 million pairs able for farming. For example, when about increasing costs cited in the article are moving operations from their The Vietnam Era? Over time, Nissan is counting on shifts and efficient use of of shoes. In the second step, an increase deciding to produce 8 million tons of resources. headquarters (General Motors is headquartered like these to save hundreds of millions, if of only 6 million tons of watermelons cost watermelon, Capeland devoted its most PRODUCTION POSSIBILITIES not billions, of dollars and sees them as in Detroit, Michigan, and is building some cars in an additional 2 million pairs of shoes. This fertile land to this crop. That shift used LA.1112.6.3.1 Many low-skill manufacturing jobs have migrated critical to surviving in a world where the Distinguish China—more than 6,000 miles away), and have cost of cars for consumers in developing amounts to 3 million pairs of shoes for up the country’s best land, so with each between overseas. Now some higher-tech work is beginning to markets is falling rapidly. 14 million tons of watermelons. additional step, farmers had to use poorer propaganda and them discuss benefits and drawbacks of having ethical reasoning. “If you have an engineer in Hanoi The switch from shoes to watermelons land that produced less per acre than the workers in remote locations. Ask How might follow them out. SS.912.E.1.2 as compared to Japan, there is a lot of has increasing costs. Each time Capeland fertile land could. To increase output on Analyze production production and quality control be compromised By Norihiko Shirouzu SS.912.G.4.4 Analyze case studies savings you can make,” says Carlos possibility curves if Nissan designs cars in Vietnam? (Workers in The Wall Street Journal of globalization. Ghosn, CEO of Nissan. to explain choice. But the auto makers like Nissan developing countries are inexperienced; they are ietnam is barely on the map in Guangzhou, China with one of its are still taking a risk. Among the big Figure 1.3 Law of Increasing Costs often new college graduates from recently started of the global auto industry, Chinese partners. General Motors has challenges Nissan faces is a lack of college programs with little experience or exposure Vbut that is about to change. begun designing interiors in China for experience among the new college GRAPH SKILLS Nissan Motor sees the southeast Buicks it will sell in the U.S. graduates it is recruiting in Vietnam STEP 1 Shoe factories This diagram illustrates to automobiles.) Asian nation as a key piece in a strategy Nissan has been aggressive among and elsewhere. Initially, resources are used The most suitable land the law of increas- to dramatically reduce the cost of devel- big car makers in moving engineering Part of what makes it possible for efficiently to make a balance for farming is used ing costs. As produc- L2 Differentiate The article discusses assembly to grow watermelons. oping cars and to compete in the future operations to the developing world. Nissan to allow these engineers to of watermelons and shoes. tion shifts from shoes plant jobs and high-skilled jobs, which might be with rising auto manufacturers from In downtown Hanoi, the capital of design more of a car are continued STEP 2 to watermelons, more such countries as China and India. Vietnam, Nissan has assembled a team advances in computer-aided design A decision is made to grow and more resources are difficult for some students to distinguish. Prepare needed. For years, car makers have been of 700 Vietnamese engineers who are tools. But an over-reliance on “virtual more watermelons. Less suitable students by explaining the different types of jobs in slashing expenses by building assembly designing basic auto parts such as fuel engineering” tools at some auto resources are shifted to farm Land with rocky soil 1. Why would moving production. Farm production is now used to from Step 1 to Step 2 the auto industry, and the difference between jobs plants in low-cost countries such as pipes and nozzles—at a fraction of makers’ established design centers increases. Shoe production grow watermelons. use up more resources that have been outsourced in the past (assembly Russia, Turkey and Mexico. Now, high- the cost of doing the work in the auto instead of working with actual compo- decreases. than staying at Step 1? skill design and engineering operations, maker’s main engineering center in nents has bred quality problems in STEP 3 2. Why do you think plant jobs) and the new trend in the outsourcing of which have long remained in industrial- Japan. The Vietnamese engineers, many recent years. A decision is made to grow even Capeland might higher-skilled jobs (engineers). ized countries like the U.S., Germany of whom have never driven a car before, more watermelons, and more decide to increase and Japan, are starting to follow. earn about $200 a month—a 10th of Land with rocky soil and watermelon produc- Applying Economic Principles resources are shifted to farm poor drainage is now used Honda Motor last year announced what their counterparts bring home in production. Because the added tion in spite of the Companies, like countries, can to grow watermelons. plans to create a development center Japan, according to Nissan. land is less productive, a greater increasing costs? increase their productive capacity by All print resources are available amount of it must be cultivated. shifting factors of production. Based Farm output increases. Shoe on the Teacher’s Resource on the above story, what changes did output decreases by an even Use videos at PearsonSchool.com/PHecon as Library CD-ROM and online at Powered by Nissan make in either land, labor, or greater amount. The Wall Street Journal a springboard for a discussion on a current topic. capital? www.PearsonSchool.com/PHecon. Classroom Edition

16 What Is EconomIcs? Chapter 1 SeCtION 3 17

SS.912.G.4.4 Analyze case studies of globalization.

ECON13_SE_FL_CH01_S03.indd 16 3/1/11 7:27:34 AM ECON13_SE_FL_CH01_S03.indd 17 3/1/11 9:51:32 AM

Answer Applying Economic Principles Possible response: Nissan has been shifting its engineering labor source from industrialized countries such as Germany, Japan, and the United States to Vietnam. By building design centers in the developing world, Nissan has changed its physical capital. Nissan has changed its human capital by hiring engineers who lack experience, while, at the same time, providing them with more advanced design software.

16 Unit 1

ECON13_TE_FL_CH01_S03.indd 16 3/8/11 11:02:46 PM Cost grows more watermelons, the sacrifice in law of increasing Chapter • Section 3 terms of shoes increases. Eventually, it costs costs an economic We can also use production possibilities principle which states graphs to determine the cost involved in Capeland an additional 5 million pairs of that as production a decision. Remember that cost does not shoes to increase watermelon production shifts from making RESEARCH AND DEBATE necessarily mean money. To an economist, by only 1 million tons. one good or service to another, more and more Have students research the effect of technology cost always means opportunity cost. Economists explain these increasingly resources are needed Gross Value of Manufacturing Looking at the table in Figure 1.2, expensive trade-offs through the law of to increase production on production capacity in the United States. in Vietnam we can see that the opportunity cost of increasing costs. This principle states that of the second good or Distribute the “Promoting Technology” worksheet 450 service moving from producing no watermelons as production shifts from making one item (Unit 1 All-in-One, p. 31). Divide the class into teams 400 to producing 8 million tons of water- to another, more and more resources are 350 melons is 1 million pairs of shoes. In necessary to increase production of the and have them debate the question Should the 300 second item. Therefore, the opportunity U.S. government fund technological research 250 other words, in order to produce 8 million (in trillions of dong) 200 tons of watermelons, Capeland had to cost increases. that may profit private companies? 150 sacrifice the opportunity to produce Why does the cost increase? According L3 100 1 million pairs of shoes. In the same way, to Figure 1.3, it is because some resources Use the Peer Tutoring and Peer Feedback 50 if Capeland later decides to increase water- are better suited for use in farming while Strategy (p. T25) to help students of different ability

Current prices 0 melon production from 8 million tons others are more appropriate for manu- Simulation Activity 2002 2003 2004 2005 2006 levels work together on debate teams. to 14 million tons—an increase of only facturing. Moving resources from factory Kitchen Challenge SOURCE: International Monetary Fund, Vietnam Statistical You may be asked L2 Appendix, December 2007 6 million tons—it costs 2 million pairs to farm production means that farmers Distribute the “Governments Promote to take part in a of shoes. In the first step, those 8 million must use resources that are not as suit- role-playing game Technology” worksheet (Unit 1 All-in-One, p. 32). tons of watermelons cost 1 million pairs able for farming. For example, when about increasing costs The Vietnam Era? Over time, Nissan is counting on shifts and efficient use of of shoes. In the second step, an increase deciding to produce 8 million tons of resources. EXTEND like these to save hundreds of millions, if of only 6 million tons of watermelons cost watermelon, Capeland devoted its most PRODUCTION POSSIBILITIES not billions, of dollars and sees them as an additional 2 million pairs of shoes. This fertile land to this crop. That shift used Have students create their own data tables and Many low-skill manufacturing jobs have migrated critical to surviving in a world where the cost of cars for consumers in developing amounts to 3 million pairs of shoes for up the country’s best land, so with each production possibilities curves for two sets of overseas. Now some higher-tech work is beginning to markets is falling rapidly. 14 million tons of watermelons. additional step, farmers had to use poorer goods for a fictional nation. Have them answer the follow them out. “If you have an engineer in Hanoi The switch from shoes to watermelons land that produced less per acre than the question: What and how much does your production has increasing costs. Each time Capeland fertile land could. To increase output on as compared to Japan, there is a lot of possibility curve tell this nation to produce? By Norihiko Shirouzu SS.912.G.4.4 Analyze case studies savings you can make,” says Carlos The Wall Street Journal of globalization. Ghosn, CEO of Nissan. L2 ELL Differentiate Have students create a But the auto makers like Nissan ietnam is barely on the map in Guangzhou, China with one of its are still taking a risk. Among the big Figure 1.3 Law of Increasing Costs poster about one form of technology and how of the global auto industry, Chinese partners. General Motors has challenges Nissan faces is a lack of it has increased efficiency in business. Vbut that is about to change. begun designing interiors in China for experience among the new college GRAPH SKILLS Nissan Motor sees the southeast Buicks it will sell in the U.S. graduates it is recruiting in Vietnam STEP 1 Shoe factories This diagram illustrates Guiding Question Wrap up Asian nation as a key piece in a strategy Nissan has been aggressive among and elsewhere. Initially, resources are used The most suitable land the law of increas- to dramatically reduce the cost of devel- big car makers in moving engineering Part of what makes it possible for efficiently to make a balance for farming is used ing costs. As produc- Have students return to the section Guiding Question. of watermelons and shoes. to grow watermelons. oping cars and to compete in the future operations to the developing world. Nissan to allow these engineers to tion shifts from shoes Review the completed graphic organizer and clarify with rising auto manufacturers from In downtown Hanoi, the capital of design more of a car are continued STEP 2 to watermelons, more such countries as China and India. Vietnam, Nissan has assembled a team advances in computer-aided design A decision is made to grow and more resources are any misunderstandings. Have a wrap up discussion needed. For years, car makers have been of 700 Vietnamese engineers who are tools. But an over-reliance on “virtual more watermelons. Less suitable about how a nation decides what to produce. slashing expenses by building assembly designing basic auto parts such as fuel engineering” tools at some auto resources are shifted to farm Land with rocky soil 1. Why would moving production. Farm production is now used to from Step 1 to Step 2 plants in low-cost countries such as pipes and nozzles—at a fraction of makers’ established design centers increases. Shoe production grow watermelons. use up more resources Russia, Turkey and Mexico. Now, high- the cost of doing the work in the auto instead of working with actual compo- decreases. than staying at Step 1? skill design and engineering operations, maker’s main engineering center in nents has bred quality problems in STEP 3 2. Why do you think which have long remained in industrial- Japan. The Vietnamese engineers, many recent years. Assess and Remediate A decision is made to grow even Capeland might ized countries like the U.S., Germany of whom have never driven a car before, more watermelons, and more decide to increase and Japan, are starting to follow. earn about $200 a month—a 10th of Land with rocky soil and watermelon produc- L3 L2 Collect the “Promoting Technology,” Applying Economic Principles resources are shifted to farm poor drainage is now used Honda Motor last year announced what their counterparts bring home in production. Because the added tion in spite of the “Governments Promote Technology” worksheets. Companies, like countries, can to grow watermelons. plans to create a development center Japan, according to Nissan. land is less productive, a greater increasing costs? increase their productive capacity by amount of it must be cultivated. Assess students’ research and debate performance. shifting factors of production. Based Farm output increases. Shoe L3 Section 3 Assessment on the above story, what changes did output decreases by an even Powered by Use videos at PearsonSchool.com/PHecon as Nissan make in either land, labor, or greater amount. L3 The Wall Street Journal a springboard for a discussion on a current topic. capital? Give Section Quiz A (Unit 1 All-in-One, p. 33). Classroom Edition L2 Give Section Quiz B (Unit 1 All-in-One, p. 34).

16 What Is EconomIcs? Chapter 1 SeCtION 3 17 (Assess and Remediate continued on p. 18)

ECON13_SE_FL_CH01_S03.indd 16 3/1/11 7:27:34 AM ECON13_SE_FL_CH01_S03.indd 17 11/9/11 9:10:53 PM factors of production and create a Virtual Economics possibilities curve. L2 Differentiate Constructing a Production Lesson Title Have you ever Possibilities Curve Use the following had to make up your mind? lesson from the NCEE Virtual Economics CD-ROM to evaluate how Type of Activity Using statistics Answers production decisions are made. Click Complexity Low on Browse Economics Lessons, specify Graph Skills . Possible answer: More labor and Time 100 minutes grades 9–12, and use the key words capital are needed to make poorer land productive. your mind. NCEE Standards 1, 2 2. Possible response: increase watermelon production if producing them is more profitable than selling In this activity, students will use a shoes, in spite of increasing costs. fictional case study to examine the

Chapter 17

ECON13_TE_FL_CH01_S03.indd 17 11/10/11 8:44:05 AM Chapter • Section 3 Technology and Education When economists collect data to create quick study Quickguide study Guide production possibility curves, they must Have students complete the Self-Test Online and first determine which goods and services Chapter 1: What Is Economics? continue their work in the Essential Questions a country can produce with its current Journal. resources. A country’s resources include Section 2 How does its land and natural resources, its work- opportunity cost affect need, p. 3 force, and its physical and human capital. decision making? Section 3 How does a REMEDIATION AND SUGGESTIONS Section 1 How does nation decide what and want, p. 3 Both human and physical capital reflect scarcity force people how much to produce? goods, p. 3 Use the chart below to help students who are a vital ingredient of economic growth— to make economic choices? services, p. 3 struggling with content. technology. Technology is the process used to create goods and services. At scarcity, p. 4 any time, countries have used different Essential Question, Chapter 1 economics, p. 4 How can we make the WEAKNESS REMEDIATION forms of technology to produce shoes shortage, p. 4 or watermelons or any of the thousands best economic choices? Defining key terms Have students use the of products that are made. So econo- entrepreneur, p. 5 (Questions 3, 4, 5, 6) interactive Economic mists must assess each country’s level of factors of production, p. 5 Dictionary Online. technological know-how. Do workers in land, p. 5 Capeland pick watermelons by hand? Do labor, p. 5 they use assembly lines to make shoes? Interpreting Help students construct a Technology has Impact of Scarcity capital, p. 6 changed agriculture— Technology is one of the factors that can production possibilities table of values from the but not quite in the the poorer land, farmers had to use more physical capital, p. 6 increase a nation’s efficiency. Therefore, Needs and wants Resources, goods, way this cartoon curves (Questions 1, 3, production possibilities land and other resources. This left even many governments spend money investing are unlimited. and services are human capital, p. 6 shows. What is one fewer resources for producing shoes. scarce. 7, 9, 10) curve in Transparency 1.a. example of tech- in new technology. For the same reason, trade-off, p. 8 The law of increasing costs explains nology that really they may also invest in education and “guns or butter”, p. 9 could help this dairy why production possibilities curve. As we training so that its people can develop Describing the law Have students review the opportunity cost, p. 9 farmer increase move along the curve, we trade off more and use new technologies. Highly-skilled Need to make trade-offs and identify of increasing costs Action Graphs Online for production? thinking at the margin, p. 11 and more for less and less added output. workers can increase efficiency and lead to opportunity costs. (Questions 2, 8) Figure 1.3. economic growth. cost/benefit analysis, p. 11 CheCkpointWhat information can a marginal cost, p. 11 production possibilities curve reveal? CheCkpointHow does technology marginal benefit, p. 11 increase production possibilities? Impact on Individuals Impact on Businesses Impact on Nations LA.1112.1.6.1, LA.1112.2.2.2, • Make personal • Balance factors of • Make budgetary production possibilities curve, p. 13 MA.912.A.2, SS.912.E.1.2 trade-offs (time, production: land, trade-offs (“guns production possibilities frontier, p. 14 To continue to build a money) labor, capital or butter”) response to the Essential efficiency, p. 15 Journal Question, go to your • Make decisions at • Identify marginal • Determine production SECTION 3 ASSESSMENT Essential Questions Journal. the margin costs and benefits possibilities underutilization, p. 15 Assessment p. 17 SECTION law of increasing costs, Guiding Question Critical Thinking Math Skills 1. Use your completed concept web 7. Judge Suppose you were an 10. Use the information in the table to answer this question: How does economic adviser to the leader of below to create a production pos- a nation decide what and how much Capeland. Based on the production sibilities curve. Then, identify which to produce? possibilities curve in Figure 1.2, what of the following points on the graph 2. Extension Explain why a country combination of watermelons and would represent the least efficient might stop growing food and shift its shoes would you recommend? Why? use of resources: 3 units of capital Answers resources to manufacturing clothing. What other information might help goods to 25 units of consumer goods; you make the best decision? 9 units of capital goods to 20 units of Caption Possible answer: Milking machines would consumer goods; 12 units of capital Key Terms and Main Ideas 8. Compare How is the law of increasing costs similar to the concept of goods to 2 units of consumer goods. make milking cows faster. 3. What is a production possibilities decision making at the margin? Visit PearsonSchool.com/PHecon on the go curve? Checkpoint It can show an economy’s efficiency, 9. Apply Explain how each of the for additional math help. Study anytime, anywhere. Download these files today. 4. What do economists mean by following circumstances is likely to the results of growth, and the opportunity cost at efficiency? affect a nation’s production possi- Capital Goods (units) Consumer Goods (units) each level of production. 5. What do economists mean by bilities frontier: the opening of a new 0 25 online online online online online growth? What factors can produce 4 24 college of engineering; an earthquake Vocabulary Support in Audio Study Guide in Animated Charts Animated feature Animated feature economic growth? 10 21 Checkpoint Technology allows people to work in the nation’s chief farming region; 18 16 English and Spanish English and Spanish and Graphs more efficiently, meaning they can produce more. 6. What is the impact of underutilization a new type of chemical fertilizer; a 28 9 of resources? shortage of oil. 40 0 Download to your computer or mobile device at PearsonSchool.com/PHecon

LA.1112.1.6.1, LA.1112.2.2.2, 18 What Is EconomIcs? Chapter 1 quiCk study guide 19 MA.912.A.2, SS.912.E.1.2 Assessment Answers ECON13_SE_FL_CH01_S03.indd 18 3/1/11 7:27:53 AM ECON13_SE_FL_CH01_QSG.indd 19 2/14/11 1:44:20 PM 1. A nation can use a production possibilities 7. Possible response: 14 million tons of increase capital, moving frontier to right; curve to find what and how much watermelons and 12 million pairs of shoes earthquake and oil shortage would reduce to produce to use its resources most or 18 million tons of watermelons and 9 resources, cutting production and shifting efficiently. million pairs of shoes because the trade- frontier to left 2. Possible response: if it could produce more offs get increasingly expensive as more 10. Students graph should show a production clothing than food more profitably resources are shifted from manufacturing possibilities graph that indicates that the 3. graph that shows alternative ways to use one product to another. Other information least efficient use of resources is 12 units an economy’s productive resources to be considered: the profits that can be of capital goods to 2 units of consumer 4. using resources to maximize production made from shoes vs. watermelons. goods. 5. increased production, which can come 8. Both look at marginal costs and benefits of from improved efficiency or more resources a stepped change in the resources used. 6. Possible response: higher unemployment 9. Possible responses: new college of and less prosperity engineering and type of fertilizer would

18 Unit 1

ECON13_TE_FL_CH01_S03.indd 18 3/8/11 11:03:36 PM Technology and Education Chapter • Quick Study Guide When economists collect data to create quick study Quickguide study Guide production possibility curves, they must first determine which goods and services Chapter 1: What Is Economics? Assign the Essential Questions Journal a country can produce with its current After students have finished studying the chapter, resources. A country’s resources include Section 2 How does they should return to the chapter’s essential question its land and natural resources, its work- opportunity cost affect need, p. 3 force, and its physical and human capital. decision making? Section 3 How does a Section 1 How does nation decide what and want, p. 3 in the Essential Questions Journal and complete the Both human and physical capital reflect scarcity force people how much to produce? activity. a vital ingredient of economic growth— to make economic goods, p. 3 technology. Technology is the process choices? services, p. 3 Tell students to go back to the chapter opener and used to create goods and services. At scarcity, p. 4 look at the image. Using the information they have any time, countries have used different Essential Question, Chapter 1 economics, p. 4 How can we make the gained from studying the chapter, ask How does forms of technology to produce shoes shortage, p. 4 or watermelons or any of the thousands best economic choices? this illustrate the main ideas of the chapter? entrepreneur, p. 5 of products that are made. So econo- (Possible answers: even when there is no shortage, factors of production, p. 5 mists must assess each country’s level of such as in this shopping mall, scarcity exists technological know-how. Do workers in land, p. 5 Capeland pick watermelons by hand? Do labor, p. 5 because people have unlimited wants and resources they use assembly lines to make shoes? Technology has Impact of Scarcity capital, p. 6 are limited; making decisions involves trade-offs: changed agriculture— Technology is one of the factors that can but not quite in the the poorer land, farmers had to use more physical capital, p. 6 choosing to go to the mall instead of studying for increase a nation’s efficiency. Therefore, Needs and wants Resources, goods, way this cartoon land and other resources. This left even many governments spend money investing are unlimited. and services are human capital, p. 6 a test is a trade-off that has certain benefits and shows. What is one fewer resources for producing shoes. scarce. example of tech- in new technology. For the same reason, trade-off, p. 8 opportunity costs.) The law of increasing costs explains nology that really they may also invest in education and “guns or butter”, p. 9 could help this dairy why production possibilities curve. As we training so that its people can develop opportunity cost, p. 9 STUDY TIPS farmer increase move along the curve, we trade off more and use new technologies. Highly-skilled Need to make trade-offs and identify production? thinking at the margin, p. 11 and more for less and less added output. workers can increase efficiency and lead to opportunity costs. To help students prepare for college, have them economic growth. cost/benefit analysis, p. 11 CheCkpointWhat information can a practice note taking. For instance, have students marginal cost, p. 11 production possibilities curve reveal? CheCkpointHow does technology record information about key concepts in Chapter 1 marginal benefit, p. 11 increase production possibilities? Impact on Individuals Impact on Businesses Impact on Nations in a chart with the headings Concept and Example. LA.1112.1.6.1, LA.1112.2.2.2, • Make personal • Balance factors of • Make budgetary production possibilities curve, p. 13 MA.912.A.2, SS.912.E.1.2 trade-offs (time, production: land, trade-offs (“guns Ask them to trade charts with a partner to check production possibilities frontier, p. 14 To continue to build a money) labor, capital or butter”) response to the Essential efficiency, p. 15 their information and understanding. Journal Question, go to your • Make decisions at • Identify marginal • Determine production SECTION 3 ASSESSMENT Essential Questions Journal. the margin costs and benefits possibilities underutilization, p. 15 Assessment p. 17 on the go SECTION law of increasing costs, Have students download the digital Guiding Question Critical Thinking Math Skills resources available on Economics on the Go for 1. Use your completed concept web 7. Judge Suppose you were an 10. Use the information in the table to answer this question: How does economic adviser to the leader of below to create a production pos- review and remediation. a nation decide what and how much Capeland. Based on the production sibilities curve. Then, identify which to produce? possibilities curve in Figure 1.2, what of the following points on the graph 2. Extension Explain why a country combination of watermelons and would represent the least efficient might stop growing food and shift its shoes would you recommend? Why? use of resources: 3 units of capital Assessment at a Glance resources to manufacturing clothing. What other information might help goods to 25 units of consumer goods; you make the best decision? 9 units of capital goods to 20 units of consumer goods; 12 units of capital Key Terms and Main Ideas 8. Compare How is the law of increas- TESTS AND QUIZZES ing costs similar to the concept of goods to 2 units of consumer goods. 3. What is a production possibilities decision making at the margin? Visit PearsonSchool.com/PHecon on the go Section Assessments curve? 9. Apply Explain how each of the for additional math help. Study anytime, anywhere. Download these files today. 4. What do economists mean by following circumstances is likely to Section Quizzes A and B, Unit 1 All-in-One efficiency? affect a nation’s production possi- Capital Goods (units) Consumer Goods (units) Self-Test Online 5. What do economists mean by bilities frontier: the opening of a new 0 25 online online online online online growth? What factors can produce 4 24 college of engineering; an earthquake Vocabulary Support in Audio Study Guide in Animated Charts Animated feature Animated feature economic growth? 10 21 Chapter Assessments in the nation’s chief farming region; 18 16 English and Spanish English and Spanish and Graphs 6. What is the impact of underutilization a new type of chemical fertilizer; a 28 9 Chapter Tests A and B, Unit 1 All-in-One of resources? shortage of oil. 40 0 Download to your computer or mobile device at PearsonSchool.com/PHecon Economic Detective, Unit 1 All-in-One 18 What Is EconomIcs? Chapter 1 quiCk study guide 19 Document-based Assessment, p. 21 ExamView AYP Monitoring Assessments ECON13_SE_FL_CH01_S03.indd 18 3/1/11 7:27:53 AM ECON13_SE_FL_CH01_QSG.indd 19 2/14/11 1:44:20 PM PERFORMANCE ASSESSMENT Teacher’s Edition, pp. 5, 6, 9, 10, 11, 17 Simulation Activities, Chapter 1 Virtual Economics on CD-ROM, Teacher’s Edition pp. 6, 11, 17 Essential Questions Journal, Chapter 1 Assessment Rubrics

Chapter 19

ECON13_TE_FL_CH01_S03.indd 19 3/8/11 12:13:53 AM Chapter • Assessment To test your understanding of key terms and Chapter 1 Assessment 1 Assessmentonline main ideas, visit pearsonSchool.com/phecon Chapterdocument-based Assessment1 Assessment Key terms and Main Ideas 4. Predict (a) If a drought struck a country, what would Should the federal government spend Document B Chapter Assessment happen to the production possibilities curve of all farmers We are 50 years into the space age, and yet space travel is To make sure you understand the key terms and main ideas in the country? Why? (b) Would the production possibili- just as expensive as it always was. . . . of this chapter, review the Checkpoint and Section Assess- money on space exploration? 1. (a) land, labor, capital (b) Possible responses: ties curve of other industries be affected by this drought? One of the primary missions of NASA should have been ment questions and look at the Quick Study Guide on the Why or why not? Since the 1950s, the federal government has spent billions to drive down the cost of space travel. Instead of spending Land—natural resources used to generate preceding page. of dollars on its space program. While many have applauded half a billion dollars on each shuttle mission, it should have electricity used at the store; Labor—business the achievements of astronauts and space scientists, some diverted some of the funds to make research and devel- applying Your Math Skills Americans think the money could have been better spent owner and workers; Capital—equipment and Critical thinking opment a primary focus. New materials, new fuels and Interpreting Data From Graphs at home. innovative concepts, which would make space exploration 1. Give Examples (a) What are the three factors of produc- special training of workers less expensive, should have been prioritized. The space tion? (b) Choose a business in your community. Give two Imagine that you are the chief economist of a country with station costs upward of $100 billion, yet its critics call it examples of each factor of production that would apply the following production possibilities curve. Use your math Document A 2. (a) combine factors of production to produce a “station to nowhere.” It has no clearly defined scientific to that business. skills to answer the following questions. “The fundamental goal of this vision is to advance U.S. Visit PearsonSchool.com/PHecon for additional math help. purpose. goods and services (b) examples: owners of 2. Apply (a) What do entrepreneurs do? (b) Give two exam- scientific, security, and economic interests through a 5. How do the maximum robust space exploration program. In support of this goal, —Michio Kaku, “The Cost of Space Exploration,” Forbes.com Internet companies, movie producers, local store ples of people you consider to be successful entrepre- 25 amounts of each product the United States will: July 16, 2009 neurs. (c) List three qualities you think an entrepreneur a owners (c) Possible responses: imagination, to needs in order to succeed. Explain why each one would differ? 20 b • Implement a sustained and affordable human and c robotic program to explore the solar system and beyond; come up with new business ideas; persuasive be important. 6. Assume this economy is (in millions) 15 Document C producing at full efficiency. d • Extend human presence across the solar system, 3. Decide Cars that weigh more tend to be safer than light- 10 Federal Spending on Science and Space Research speaking, to convince others to invest in the How many computers starting with a human return to the Moon before the year weight cars. At the same time, they use more gasoline e $18.0 are being produced when 5 2020, in preparation for human exploration of Mars and business; and leadership, to guide workers because they are heavier. (a) Identify the trade-offs and $16.0 General Science there are 18 million tele- Televisions f other destinations; opportunity cost involved in choosing either alternative. $14.0 Space and Other 0 15 2520105 • Develop the innovative technologies, knowledge, and Technologies 3. Possible responses: (a) Opportunity cost of (b) Based on this information, which car would you visions being produced? $12.0 infrastructures both to explore and to support decisions choose to buy and why? (c) Would your answer change 7. What is the opportunity Computers (in millions) $10.0 lightweight car is greater safety; opportunity about the destinations for human exploration; and if the price of cost of producing 5 million $8.0 • Promote international and commercial participation cost of heavier car is higher fuel cost. Other gasoline doubled? computers? $6.0 in exploration to further U.S. scientific, security, and If you inherited a 8. What is the opportunity cost of producing 9 million Billions of dollars $4.0 trade-offs: heavier car pollutes more; lighter economic interests.” million dollars? If computers? $2.0 car may carry fewer passengers or less cargo. you had children? —President George W. Bush, “A Renewed Spirit of Discovery,” 0 9. What is the opportunity cost of each 1 million computers January 14, 2004 1980 1985 1990 1995 2000 2005 2008* Explain how each at point a compared to point b? (b) Students might buy the heavier car due to *estimate Year factor would affect SOURCE: U.S. Census Bureau greater safety. (c) Possible responses: doubling your cost/benefit of gasoline price would push them to buy a analysis. LA.1112.1.6.2, LA.1112.6.3, MA.912.A.2.2 lighter car to save on fuel costs; having a million AnAlyzing Documents LA.1112.6.3 dollars might convince them to buy the heavier Use your knowledge of opportunity costs and Documents A, writing about economics B, and C to answer questions 1–3. Spending on programs like NASA’s space exploration is an car because gas cost would be less problematic; To respond to the chapter Essential Question, ongoing issue. Use the documents on this page and on the Journal go to your Essential Questions Journal. 1. According to Document A, the primary goal of the having children might push them to buy the American space program should be to Web site below to answer the question: Should the federal government spend money on space exploration? Use the heavier, safer car a. land humans on the moon. 10. Complete this activity to answer the Essential Question After completing the chart, review your choices. Then, sources to support your opinion. focus on unmanned, or robot, missions. How can we make the best economic choices? As for each of the choices you made, answer the follow- B. 4. (a) The curve would shift to the left because prepare for human exploration of Mars. you have learned, scarcity and opportunity cost lie at ing questions: If you had it to do over again, would you C. advance the interests of the United States. farmers’ productive capacity would go down. the heart of all economic decisions—including those make the same choice? Why or why not? Write your D. you make. You have limited time and limited resources. answers in Column 3. (b) Possible response: Yes. The capacity of other 2. According to Document B, money for space exploration Every time you choose one alternative, you give up 11. Modify You have listed your choices and your trade- has been misspent because industries would decline because the drought something else. Using the worksheet in your Essential offs and evaluated your outcomes. Now, consider how a. shuttle missions have been unsuccessful. Questions Journal or the electronic worksheet avail- your choices might have differed if your resources had would probably result in higher food prices B. research has not been a primary focus. able at PearsonSchool.com/PHecon, keep track of differed. Write an answer to each of the following: C. the space station has many critics. which could cause some people to spend less on how you use your resources for the next three days. (a) How would your choices change if you had D. the space station remains in a fixed orbit. (a) In Column 1, record at least three items on which 10 percent more money to spend? other goods and services. This could impact the To read more about issues you spent your money and three activities on (b) What would you give up if you had five fewer 3. Document C shows that when spending on space and related to this topic, visit production possibilities of these other industries. which you spent your time. hours of free time to use in those three days? other technology has gone down, spending on general PearsonSchool.com/PHecon (b) In Column 2, list the opportunity cost for each (c) Pick one of the opportunity costs on your list. 5. 5 million more televisions than computers science research entry in Column 1. Remember that the opportunity What conditions might have led you to make the (20 million; 15 million) cost is the next most desirable alternative—the opposite choice? Explain. a. has gone up. thing you gave up when you made your choice. B. has gone down. 6. 5 million computers C. has stayed the same. D. has surpassed it. 7. 2 million televisions 8. 5 million televisions 20 What Is EconomIcs? Chapter 1 aSSeSSMeNt 21 9. At point a, there is no opportunity cost because the maximum number of televisions— LA.1112.6.3 Understand media literacy as a life skill.

20 million—can be produced. At point b, the ECON13_SE_FL_CH01_CA.indd 20 3/1/11 7:30:07 AM ECON13_SE_FL_CH01_CA.indd 21 3/1/11 7:30:17 AM opportunity cost of 5 million computers is 2 million televisions so the opportunity cost of online The Economics WebQuest challenges students to use 21st century skills each 1 million computers is 400,000 televisions. to answer the Essential Question. Students assume the role of political leaders and 10. Students’ answers will vary. They must list at conduct research on world markets and the situations of the countries they represent least three purchases and three activities and to guide them toward making the best economic choices for their people. have an opportunity cost for each one. Remind students to continue to develop an Essential 11. (a) Students might opt for a more expensive Questions video. Guidelines and a production alternative or, thinking at the margin, more binder are available at units of a particular item. Some might save the www.PearsonSchool.com/PHecon. money. (b) Students might give up an option that cost more time. (c) Students should explain which option they would have taken and under what conditions.

20 Unit 1

ECON13_TE_FL_CH01_S03.indd 20 3/8/11 11:03:55 PM To test your understanding of key terms and Chapter • Assessment Chapter 1 Assessment 1 Assessmentonline main ideas, visit pearsonSchool.com/phecon Chapterdocument-based Assessment1 Assessment Key terms and Main Ideas 4. Predict (a) If a drought struck a country, what would Should the federal government spend Document B happen to the production possibilities curve of all farmers We are 50 years into the space age, and yet space travel is Document-Based To make sure you understand the key terms and main ideas in the country? Why? (b) Would the production possibili- just as expensive as it always was. . . . of this chapter, review the Checkpoint and Section Assess- money on space exploration? ties curve of other industries be affected by this drought? One of the primary missions of NASA should have been ment questions and look at the Quick Study Guide on the Assessment Why or why not? Since the 1950s, the federal government has spent billions to drive down the cost of space travel. Instead of spending preceding page. of dollars on its space program. While many have applauded half a billion dollars on each shuttle mission, it should have the achievements of astronauts and space scientists, some diverted some of the funds to make research and devel- analyzing documents applying Your Math Skills Americans think the money could have been better spent Critical thinking opment a primary focus. New materials, new fuels and 1. D Interpreting Data From Graphs at home. innovative concepts, which would make space exploration 1. Give Examples (a) What are the three factors of produc- less expensive, should have been prioritized. The space tion? (b) Choose a business in your community. Give two Imagine that you are the chief economist of a country with 2. B station costs upward of $100 billion, yet its critics call it examples of each factor of production that would apply the following production possibilities curve. Use your math Document A a “station to nowhere.” It has no clearly defined scientific to that business. skills to answer the following questions. “The fundamental goal of this vision is to advance U.S. 3. A Visit PearsonSchool.com/PHecon for additional math help. purpose. 2. Apply (a) What do entrepreneurs do? (b) Give two exam- scientific, security, and economic interests through a 5. How do the maximum robust space exploration program. In support of this goal, —Michio Kaku, “The Cost of Space Exploration,” Forbes.com ples of people you consider to be successful entrepre- 25 WRITING ABOUT ECONOMICS amounts of each product the United States will: July 16, 2009 neurs. (c) List three qualities you think an entrepreneur a needs in order to succeed. Explain why each one would differ? 20 b • Implement a sustained and affordable human and Possible responses: Yes, space exploration furthers c robotic program to explore the solar system and beyond; be important. 6. Assume this economy is (in millions) 15 Document C producing at full efficiency. d • Extend human presence across the solar system, “U.S. scientific, security, and economic interests.” 3. Decide Cars that weigh more tend to be safer than light- 10 Federal Spending on Science and Space Research How many computers starting with a human return to the Moon before the year weight cars. At the same time, they use more gasoline e $18.0 No, space exploration is too costly when the are being produced when 5 2020, in preparation for human exploration of Mars and because they are heavier. (a) Identify the trade-offs and $16.0 General Science government already has a huge deficit. Use the there are 18 million tele- Televisions f other destinations; opportunity cost involved in choosing either alternative. $14.0 Space and Other 0 15 2520105 • Develop the innovative technologies, knowledge, and Technologies (b) Based on this information, which car would you visions being produced? $12.0 following as guidelines to assess the essay. infrastructures both to explore and to support decisions choose to buy and why? (c) Would your answer change 7. What is the opportunity Computers (in millions) $10.0 about the destinations for human exploration; and Student essay should demonstrate an understanding if the price of cost of producing 5 million $8.0 • Promote international and commercial participation gasoline doubled? computers? $6.0 of the issues involved in the debate. Use the in exploration to further U.S. scientific, security, and If you inherited a 8. What is the opportunity cost of producing 9 million Billions of dollars $4.0 economic interests.” following as guidelines to assess the essay. million dollars? If computers? $2.0 you had children? —President George W. Bush, “A Renewed Spirit of Discovery,” 0 9. What is the opportunity cost of each 1 million computers January 14, 2004 1980 1985 1990 1995 2000 2005 2008* L2 Differentiate Students use all documents on Explain how each at point a compared to point b? *estimate Year factor would affect SOURCE: U.S. Census Bureau the page to support their thesis. your cost/benefit analysis. LA.1112.1.6.2, LA.1112.6.3, MA.912.A.2.2 L3 Differentiate Students use the documents on AnAlyzing Documents this page and additional information available online LA.1112.6.3 Use your knowledge of opportunity costs and Documents A, writing about economics at www.PearsonSchool.com/PHecon to support B, and C to answer questions 1–3. Spending on programs like NASA’s space exploration is an their answer. To respond to the chapter Essential Question, ongoing issue. Use the documents on this page and on the Journal go to your Essential Questions Journal. 1. According to Document A, the primary goal of the L4 Differentiate Students incorporate information American space program should be to Web site below to answer the question: Should the federal government spend money on space exploration? Use the a. land humans on the moon. provided in the textbook and online at 10. Complete this activity to answer the Essential Question After completing the chart, review your choices. Then, sources to support your opinion. focus on unmanned, or robot, missions. How can we make the best economic choices? As for each of the choices you made, answer the follow- B. www.PearsonSchool.com/PHecon and include prepare for human exploration of Mars. you have learned, scarcity and opportunity cost lie at ing questions: If you had it to do over again, would you C. advance the interests of the United States. additional research to support their opinion. the heart of all economic decisions—including those make the same choice? Why or why not? Write your D. you make. You have limited time and limited resources. answers in Column 3. 2. According to Document B, money for space exploration Go Online to www.PearsonSchool.com/PHecon Every time you choose one alternative, you give up 11. Modify You have listed your choices and your trade- has been misspent because something else. Using the worksheet in your Essential offs and evaluated your outcomes. Now, consider how for a student rubric and extra documents. a. shuttle missions have been unsuccessful. Questions Journal or the electronic worksheet avail- your choices might have differed if your resources had B. research has not been a primary focus. able at PearsonSchool.com/PHecon, keep track of differed. Write an answer to each of the following: C. the space station has many critics. how you use your resources for the next three days. (a) How would your choices change if you had D. the space station remains in a fixed orbit. (a) In Column 1, record at least three items on which 10 percent more money to spend? To read more about issues All print resources are available you spent your money and three activities on (b) What would you give up if you had five fewer 3. Document C shows that when spending on space and related to this topic, visit on the Teacher’s Resource which you spent your time. hours of free time to use in those three days? other technology has gone down, spending on general PearsonSchool.com/PHecon (b) In Column 2, list the opportunity cost for each (c) Pick one of the opportunity costs on your list. Library CD-ROM and online at science research entry in Column 1. Remember that the opportunity What conditions might have led you to make the www.PearsonSchool.com/PHecon. cost is the next most desirable alternative—the opposite choice? Explain. a. has gone up. thing you gave up when you made your choice. B. has gone down. C. has stayed the same. D. has surpassed it.

20 What Is EconomIcs? Chapter 1 aSSeSSMeNt 21

LA.1112.1.6.2 Listen to, read, and discuss familiar texts.

ECON13_SE_FL_CH01_CA.indd 20 3/1/11 7:30:07 AM ECON13_SE_FL_CH01_CA.indd 21 LA.1112.6.3 Understand media literacy as a life skill. 3/1/11 7:30:17 AM MA.912.A.2.2 Interpret a graph to represent a real-world situation.

Chapter 21

ECON13_TE_FL_CH01_S03.indd 21 3/8/11 11:04:12 PM

What Is Economics? Chapter 1 Section 1 

What Is Economics? Chapter 1 Section 1