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This week for Economics, you will finish up Unit 1, starting with an overview of the major economic theorists,

such as Adam Smith, John Maynard Keynes, along with Hayek and Friedman.

Make sure that you are able to identify the views that these theorists hold and that you're able to understand them and explain them as well.

After that, you are ready for your first summative assessment of the course.

You are required to complete this worksheet.

You will need to come up with your own example, but I’ll help you out by providing an example that you can use as a reference.

First, you need to identify what type of business you want to start, then, as any business owner would,

you need to figure out what resources you will need.

For each of these three categories, you need to identify at least seven resources.

Natural, or land, resources. Let's say that I'm going to open up a pizza restaurant.

Let's say that my natural, or land, resources can include anything that can actually be found in nature or produced from nature.

That might include sauce, dough, pasta, cheese, vegetables, meats, and maybe spices.

Then I need to come up with human, or labor, resources.

For these, you need to realize that you're not going to be able to run the entire business on your own.

You're going to need pasta chefs. You might need someone to help you manage the place. You might need a prep cook, maybe a dishwasher.

Then you're going to need capital resources.

In this case, we’re talking about buildings or machinery.

I’m obviously going to need a building for my Italian or pizza restaurant. Let's actually call it an Italian restaurant because I want to focus on more than just pizza.

I'll need equipment such as ovens, stoves, and other sorts of equipment to help me run my business.

Because of scarcity, I'm going to be limited. In reality, I won’t be able to buy everything that I want or produce everything that I want.

I don’t have an unlimited amount of money to spend, and my suppliers don’t have an unlimited amount of money to pay for what I'm going to need to give me an unlimited amount of cheese or ovens.

Then I also won't find an unlimited amount of people to work for me. That's the reality of the situation.

Because of scarcity I'm going to be limited in what I want to sell. Scarcity forces me to make choices.

For the purpose of this assignment, let’s say that scarcity limits me to two products that my business can produce.

Pasta and pizza.

If I produce 7 units of pizza, I have to realize that I can't sell an unlimited supply of both pizza and pasta because I simply don't have the resources to do that. Resources are limited because of scarcity.

If I produce 7 units of pizza it means that my resources are maxed out, and I can’t produce any units of pasta.

If I switch things up, and I produce 5 units of pizza, now I can produce 1 unit of pasta, and it frees up my resources.

Inversely, if I produce 7 units of pasta, I can produce no any pizza. It ends up looking something like this. And let's say it jumped from 5 units to 7.

It doesn't matter as long as it's showing my resources are indeed scarce. In the end it's going to look like this.

Next, I have to draw a production possibilities curve that will end up looking something like this.

As you can see, I have my axes labeled quantity of pizza produced and quantity of pasta that I can produce as well.

As you see, this downward slope indicates that my resources are scarce and that I’m limited with the amount of resources that I have and the choices in opportunity cost that I am forced to make.

It is all about opportunity cost, isn’t it? If I choose to spend all of my resources on pizza, then my opportunity cost is that I could have made some pasta instead.

If I produce only pasta, then my opportunity cost is that I could’ve freed up my resources to produce some pizza too.

As a business owner, government regulations will eventually come into play and either give me resources and better choices or further limit my choices.

If the government puts more money into the hands of my customers by enacting an expansionary fiscal policy, then I’ll have more profit and will be able to produce more.

On the other hand, if the government increases taxes through a contractionary fiscal policy, it could cause me to have fewer resources because my customers are going to have less money to spend,

especially if the tax is regressive or even proportional since it would take more money away from consumers would visit a business like mine that isn’t exactly fine dining.

On the other hand, if the government decides to use that tax money to give me a business loan or grant because they want to help small businesses,

then all the sudden things change and taxes could have an overall positive benefit, depending on how the government decides to spend those taxes.

Operating a business can be tricky, and hopefully, this lesson shows you that.

If you have any questions while completing this assignment, stop by the office or send me a message.