FOUNDATIONSSSEF1 a. Scarcity is the issue that exists due to limited resources and limited needs. The factors of production, or productive resources, are used to produce goods and services. The productive resources (CELL) are capital, entrepreneurship, land, and labor. They is a limited supply of each. For example, there is only so much money in the world. There are not unlimited welders and computers used to make products. There are only so many people willing to take on the risk of economics and start or invest in a business. The Earth has a set amount of land, a number that cannot be changed. People compete for land and property. Competition happens when there is less supply than demand. There are also a very limited number of workers and employees in the world, and each one can only work a certain number of hours per week. Scarcity is not the same as shortage, though. Shortage is temporary, scarcity is not. Shortage happens when a cold snap kills most of a farmers potatoes, creating a shortage of potatoes. The farmer will have more potatoes the next year (or sooner), which disqualifies it from being a scarcity. Scarcity is the permanent, unchangeable condition that arises from the unlimited wants and limited resources of our world.b. Productive resources, or factors of production, are anything used to make goods or services. Capital, entrepreneurship, land, and labor make up every input in the production cycle. Capital can be physical or financial. Financial capital is money. Physical capital is the tools and machinery used in production. Buildings, machinery, equipment, and computers are all examples of physical capital, because they are used directly in the process of production. Entrepreneurship is the business-starters and investors (entrepreneurs) in the economy. Land is relatively simple, it is the land used in production. Trees, property for facilities, natural resources, and anything else that comes from the land are placed in this category. Labor is the work employees put into goods and services. An employee of a car factory who works on the assembly line is putting labor into the production of the cars. Employees are compensated, or paid, usually with money, for the labor they put in.c. Entrepreneurs are risk takers, making a gamble on their luck in the economy. Starting a business is a very high risk endeavor, and most don’t make a cent of profit for years. According to the Bureau of Labor Statistics, 20% of businesses fail in their first year, and 50% in their fifth. They do this for a variety of reasons which vary from person to person. Some people start a business (or invest in one) because they believe they will make a profit, or extra money. Perhaps they were making little at their old job and decided they could do a little better. Perhaps they wanted to be their own boss. Many people have fantasized about being their own boss at one point or another. As a boss, they could set their hours, availability, and decide who to work with by hiring employees. Sometimes, someone simply just hates their job and wants something new. Entrepreneurs could also believe their company would improve the lives of everyone in society. Perhaps their business would help the environment. For business owners, the risks of economics are weighed out by the possibility of success in any of these areas. d. A tradeoff is the second best opportunity given up by someone making a decision. The value of that tradeoff is the opportunity cost. Opportunity cost can be expressed by a financial/numerical value or as something given up. For example, someone can either spend Friday night studying for the test Monday, or go out with their friends. Time is scarce, meaning there is not enough time to allow us to do everything we want to do, which means they must choose how to allot their limited time. If they choose to go out with their friends, their tradeoff is time they could have spent studying. The opportunity cost is the better grade they would have earned on the test, had they chose to study. Another example is someone choosing between buying a $50 jacket and a $15 pair of socks. Money is scarce, so they cannot buy both the jacket and the socks. They must choose one, and allot their limited resources to best satisfy their unlimited wants.If they choose the jacket, their tradeoff would be the socks they could have purchased. Their opportunity cost is the $25 they would have saved, as well as the comfort of wearing those socks. The tradeoff in an economic decision is the second best option, or the first alternative, and the opportunity cost is the value of that tradeoff.SSEF2 a. Marginal means additional. Cost is a negative effect, while benefit is a positive effect. The marginal cost is the additional negative impact per unit, and the marginal benefit is the additional positive impact per unit. For example, if someone decided to eat a pizza, they would eat one slice at a time. Each slice would be considered a unit. The first slice they ate would have a high marginal benefit, because that slice greatly reduced their hunger. The second slice would have slightly smaller marginal benefit, because they had already eaten a slice. The third slice would have less marginal benefit still, because that particular slice was on top of two already eaten slices. The person is probably beginning to fit up. Being less hungry means the slice ‘feels less good’ going into their body. By the fourth slice, they may cross into marginal cost. Now, eating more slices is hurting them rather than helping, because they are full, so their stomach will probably begin to ache. The fifth slice has a larger marginal cost, because that slice makes them even more uncomfortable than the previous. Another example is after someone goes on a run, water is very important. The first glass feels like a lifesaver, because they are tired and sweating and their mouth and throat is dry. The second glass, or unit, has a smaller marginal benefit, because they already drank a glass. The third may cross into marginal cost, because they have already had enough water, so that glass is beginning to make their stomach feel heavy, and the ater may begin to slosh around is they make sudden movements. Marginal means additional, so marginal cost and benefit are the positive and negative effects of each additional unit.b. There are two types of economic decisions; rational and irrational. Rational decisions occur when the benefits, or positive effects outweigh the costs, or negative effects. In order to make a rational decision, one must be aware of the costs and benefits for each particular decision. The standard for rational and irrational decisions may vary from person to person, because everyone has a different perception of what is important, and right versus wrong. A clearly rational decision for one person or group may seem completely irrational to another. For example, someone may have to choose between getting a hamburger or gas for their car; due to the scarcity of money, they cannot do both. One person may decide to get a hamburger, because the benefit of eating food (particularly that food) outweighs the cost of not having gas in their car. Their tradeoff is getting gas for their car, and their opportunity cost is being able to drive wherever they want. Depending on their situation, their opportunity cost may also be the money they would have to spend on a tow truck if their car ran out of gas; money they would have saved had they purchased the gas in the first place (since gas is less expensive than hiring a tow truck). Someone else might say that the rational decision is to get gas, because the benefit of having gas in their car outweighs the cost of not having a hamburger. For them, gas is most important. Their tradeoff would be getting a hamburger, and their opportunity cost would be the satisfaction and feeling of eating a hamburger, and the money they would have saved had they chose the less expensive option, the hamburger. While that decision may be very clear for one person, another may see it a very different way. Rational economic decisions are decisions where the benefits outweigh the costs,and irrational decisions happen when the costs outweigh the benefits. Everyone has a different perception of rational and irrational decisions, making it impossible to predict the outcome of every situation based on the costs and benefits, because someone else may see those effects very differently.c. There are two types of incentives: positive and negative. Positive incentives encourage people to make a certain decision because they will be rewarded if they do. Negative incentives encourage people to not make a particular decision, because they will be punished if they do. One example of a positive incentive was the tax break the Georgia government gave citizens with alternative fuel vehicles. Many people remember the high impact Tesla made on the Atlanta area in 2014. They brought in multiple dealers, and people all over town began driving the environmentally friendly cars. The Chevy Bolt, however, the latest in alternative fuel technology, which has made a grand entrance in other states, is almost unknown in Georgia. The reason for both situations is the tax deduction the Georgia government gave up until 2015. Drivers with alternative fuel vehicles were applicable for multiple tax breaks and deductions. Tesla made a large impact because the benefits of buying an alternative fuel vehicle outweighed the costs. Alternative fuel vehicles are more expensive than regular, but the tax breaks changed that. People were incentivized to buy alternative fuel cars because they could save money, a positive incentive. The bill was discontinued in 2015, so now alternative fuel vehicles are just more expensive. People do not want to spend the time or money finding the right vehicle and getting it to Georgia, when they could just uy a normal car and turn their back to the admissions those cars produce. One example of a negative incentive is the taxes placed on products in Georgia. The state charges a $0.37 tax on each pack of cigarettes sold. This discourages people from buying cigarettes, because they have to pay an additional tax on each product. For some people, the cost of paying the extra tax outweighs the benefit of smoking the cigarettes. Some people believe the tax should be raised, as Georgia ranks 43rd for their cigarette tax, to further discourage smoking.SSEF3a. Skilled workers are highly trained in a specific task for field, and specialized at performing that certain task. Unskilled workers are untrained and unqualified, while semi-skilled workers fall right in the middle. It is far more efficient for businesses to divide the work, with each person responsible for what they are good at. Car assembly lines are able to churn out finished products minutes apart because each person o the assembly line is practiced and trained at what they do, which is a very specific task. Instead of a small team of people completing each separate car completely on their own, which would take days or weeks, each person does a small part on every car. People are able to work more efficiently when they are doing the same thing over and over, instead of many different things. In softball, there are nine positions on the field. When girls are young, they are similar to unskilled workers. They are not trained in any specific position, and typically play every position on the field. As they grow older, they begin to play fewer positions, getting training in the specific positions they enjoy and are good at. They become similar to skilled workers, highly trained in task or field. On elite travel and high school teams, and at the college and professional level, players typically only play one position, sometimes two. Utility players, or players who can play many positions on the field (in rare cases all), are very coveted and hard to come by. The reason players focus on one or a few positions as they get older and better is because if they spend all their time on one position, they will be very good at that position. If they split their time between five positions, they will only be reasonable at all five; not great. Players must wrestle with the scarcity of time. Workers are similar. If they spend all their time doing one task, they will be very practiced, efficient, and skilled at that one task. That saves the company time, which means they can make more products, thus making more profit. This is division of labor, or dividing the work so everyone does only what they are good at; nothing else. As the old saying goes, “Divide and conquer.”b. Voluntary, non-fraudulent exchange occurs when both parties agree to the exchange, and each is getting exactly what they expect; neither is being swindled or conned. Both parties benefit from the exchange, because they are both giving something they do not want, and receiving something they do want in exchange. One example of a voluntary, non-fraudulent exchange is when one party wants to sell a gently-used toaster they no longer want for $50. Another party is looking for a gently-used toaster for under $60. Party one receives $50, the amount they agreed on, and party two receives the toaster, also what they agreed on. The toaster is in the condition it was promised, and it not damaged. If pictures were exchanged, they showed the toaster in its true condition. Both parties give what they do not want, and receive what they do want, as agreed upon ahead of time. Neither party was tricked or conned, making the exchange non-fraudulent. Both parties entered into the exchange by choice, because they wanted to. They were not forced or threatened into it, they did so with free will, making the exchange voluntary.