PURPOSE:
To illustrate how unlimited wants and
scarce resources lead to trade-offs and choices, and to show how the
economic cost of using resources to produce a good is the value of the goods
that could have been produced with those same resources.
OBJECTIVES:
1. The amount of goods and services
available for consumption in an economy depends on the quality of the
economy’s productive resources, how well those resources are used, and
whether all resources can be kept employed.
2. Productive resources are: land, labor, machinery,
structures, and technical and managerial knowledge of various types and
qualities. These resources are called "scarce" resources because they are
never able to produce everything that everybody wants.
3. Resources tend to be more suitable for producing
one type of good than another. Therefore, as more and more of a nation’s
resources are devoted to the production of a specific good, there will be
diminishing marginal returns.
4. The cost to society of producing a certain good
(i.e. shifting productive resources into the production of that good) is the
value of the goods that those resources could have otherwise produced.
KEY ECONOMIC
CONCEPTS:
Scarcity of resources, marginalism,
choices, tradeoffs, diminishing returns, substitution,
opportunity cost.
Contemporary Issues Resources and Scarcity
President Bush – as President
Clinton before him – has put a big emphasis on education. This
emphasis on education is not unique to the U.S. The strong and
sustained growth in Asia over the last three decades can be
attributed, among other things, to high levels of educational
attainment. Why is education so important to the economic future
of a country? Specifically what does education do to the
production possibilities curve – and for living standards? Is
education a consumption good or an investment good?
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For a complete transcript of this video program download TVpdf#1 |
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Unspoiled Alaskan Wilderness or Oil?
Most all economic decisions involve tradeoffs.
This segment explores Congress’s 1980 decision to designate more than
100 million acres of land in Alaska as Natural Parks and Wilderness
areas, closing this land to mineral exploration.
From the perspective of Don Young, U.S. Congressman
(R-Alaska), the cost of this decision, means loss of jobs for US workers
and a continuing dependence on foreign oil and minerals.
However, environmentalists and Morris Udall, U.S.
Congressman (D-Arizona), viewed this as short sighted. They argue that
Alaska is the last wild home for many species of plants and animals.
While there might be a short term economic gain, they believe the land
should be preserved for future generations.
Congress with feedback from the American public
weighs these matters of which is most important to them.
Comment & Analysis by Richard Gill
The Alaskan Lands Issue is ultimately an
issue of limits. What is the true value to society of
preserving our natural wilderness. The first and most
important lesson in all of economics is that we usually
can’t have everything we want. Our desires for material
goods may be virtually unlimited. Our resources for
fulfilling those desires are not. They are limited and
scarce. More wilderness, less oil and minerals. More oil
and minerals, less wilderness. Economists call this the
"production possibilities curve".
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Guns or Butter?
In 1943, American servicemen were fighting a war
on two fronts while American civilians were living better
than they had in years. This segment explores how the United
States increased its production of both guns and butter
during World War II.
In the Great Depression, which began with the Great
Stock Market Crash of 1929, the U.S. economy was in ruins.
Industry was in collapse, banking was in panic and labor was
in despair, unemployment high.
However, when German armies marched in Poland,
igniting World War II, the U.S. began mobilizing resources
to aid the Allies. To do this there was a total mobilization
of the economy, where new steel mills were built, new
factories opened, new jobs created to build tanks guns and
planes.
With full employment came a demand for consumer
goods which had been unaffordable during the lean years of
the 1930s. The country was producing and consuming more of
everything. For a while the United States kept increasing
its production of both guns and butter…both military and
consumer goods…but eventually choices had to be made.
After Pear Harbor, mobilization efforts were
directed towards military efforts, with a reduction of
civilian products. No new automobiles were produced by the
late spring of 1942. Instead production was switched to
producing tanks, airplane parts, and guns in the big auto
factories.
Our ability to quickly and completely mobilize these
resources brought final military victory and economic
recovery
Comment & Analysis by Richard Gill
Economics is fundamentally concerned with scarcity and
limits. But we do not always produce to our limits. And
those limits can and do change over time.
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Workers Health or Profitability?
This segment explores the tradeoffs made in
deciding how much money should industry spend on a workers’
heath and safety and at what cost.
Workers in the textile industry, suffering from
"brown lung" disease brought on by inhaling the particles of
cotton dust and fiber, supported OSHA’s demand for tougher
standards in the mills despite the costs.
However, in the 1970’s the American textile industry
was locked in a fierce struggle against foreign competition.
American textile industry was spending millions to protect
worker health, but competing Asian textile industries spent
almost nothing.
Industry claimed that the regulations would cost
them billions and that they could achieve almost the same
result with using inexpensive dust masks, which would
significantly reduce the risk of the disease, but not
eliminate it. Money spent on improving health would mean
higher consumer costs and elimination of thousands of jobs
for what industry experts believed would be a massive
diversion of resources resulting in limited health and
safety improvements.
Comment & Analysis by Richard Gill
The first relatively small expenditures for worker
protection were able to produce large improvements in worker
health. To improve health still further required massive
expenditures. The more of one economic good you produce, the
more it usually costs in terms of some other economic good
you have to give up.
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