Introduction to Economics

Scarcity
How we deal with not having
enough of stuff
 Objectives: After going through this module, the learners
should be able to:
1. Define basic terms in applied economic;.

2. Differentiate economics as social science and

applied science in terms of nature and scope;

3. Examine the utility and application of applied

economics to solve economic issues and problems;
and

4. Explain how applied economics can be used to

solve economic problems.
 Food for thought!
• By graduating from high school, how much
more money will you make than someone
who doesn’t graduate over your lifetime?

• Php 8,000, or about Php 96,000 a year!

 More food for thought!
• By graduating from college, how much
more money will you make than someone
who doesn’t graduate from high school
over your lifetime?

• Php 15,000 or about Php 180,000 a year!

What is Economics?
 What is Economics?
• Def. Economics is a social science which
deals with the proper allocation of scarce
resources to satisfy the unlimited human
wants. Economics is classified as a social
science because it deals with the study of
man’s life and how he lives with other
men.
 What are NEEDS?
• Needs are the things that a person has to
have to survive.
– Food
– Water
– Shelter

– The BARE NECESSITIES!

 What are WANTS?
• Wants are those things that you would
like, but do not need to survive.

• Ex. Car
I-Pad
Concert Tickets
 Scarcity

Def. A limited amount of

resources to meet unlimited wants
and needs.
EVERYTHING is scarce!
 Why do we have Scarcity?
We have Unlimited Wants and Needs
But
Limited Resources
Create Scarcity
So we need to make Choices
What to produce, How to Produce, For
Whom to produce (tomorrow’s lesson)
 Causes of Scarcity
1. Personal Perspective: your own feelings
of what is needed or wanted.
– “I’m starving!”
– “I’m broke!”
 Causes of Scarcity (cont.)
2. Poor Distribution of Resources: not using
your resources to their potential.

– “I never have any time- yet I watch 6 hours of

television a day!!”

– “I don’t have enough money for college, but I

have to have a pair of Php 5,000 sneakers!”
 Causes of Scarcity (cont.)
3. Rapid Increase in Demand: A sudden
rush to use resources can cause a
shortage.

– Tickle Me Elmo
– X-Box
– Beanie Babies
 Ways we deal with Scarcity
1. Doing without something

– “Shut up kid- you’ll get nothing and like it”

– “I’ll go to the prom, but not on the senior trip”
– “Instead of driving to the theater, let’s watch a
movie on cable and save gas money”
Ways we deal with Scarcity (cont.)
2. Creating more resources

– “I’ll get a second job”

– “We’ll drill for more oil in Alaska”
Ways we deal with Scarcity (cont.)
3. Making better use of our resources

– “While I watch television, I’ll grade papers”

– “I’ll take my date to a matinee movie and use
a buy one get one free coupon for dinner!”
– “If we carpool to work, it’ll save gas money”
 Real Costs
• Def. All of the resources used to produce a
good or service.
• Most resources can be used for only one
thing at a time.
 Example of Real Costs
• Real costs of building a bridge instead of
a building
– Construction workers (cannot work on
building a new building)
– A crane (cannot be used to build a new
building)
– Steel (used in the bridge, cannot be used in a
new building)
 Trade Offs
Def. When you choose between two
possible uses for a resource, giving up
one alternative for another.

Ex. Bridge vs. Building

I can either buy this book or pizza,
but
not both.
 Opportunity Costs
• When you make a trade off, there are
costs. The value of time, money, goods,
and services given up in an economic
choice. The #1 alternative is the
Opportunity cost.
• By doing this, I give up the opportunity to
do that.
– If we build the bridge, we can’t build the
building.
– If I buy the pizza, I can’t buy the book.
 Trade off: Sleep vs. Study
Options Benefit Opportunity
Cost
1 hour of extra Grade of C on 1 hour of sleep
study time test
2nd hour of Grade of B on 2 hours of
extra study test sleep
time
3rd hour of Grade of B+ on 3 hours of
extra study test sleep
time
 What is the Opportunity Cost of
Going to College?
• Benefits • Opportunity Costs
– Higher Income – Costs a LOT of money
– More Job opportunities – Student loans for
– Job opportunities in a years
career I enjoy – 4 (or more) years of
– Job opportunities in school
more places – No guarantee of a job
when I get out
– What if I change my
mind?