EconomicsInternational®

Scarcity and Choice
by Liudmila Guinkel (Russia)

LESSON DESCRIPTION

In this lesson, students participate in a role play as producers of two goods, allowing students to experience scarcity. They make choices about using their scarce resource to produce both or one of two goods. Then they construct production-possibilities curves, compute opportunity costs, and conclude that scarcity requires choice and every choice has an opportunity cost.

AGE LEVEL

15-18 years old

CONCEPTS

  • scarcity
  • productive resources
  • opportunity cost

CONTENT STANDARDS

Productive resources are limited. Therefore people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

BENCHMARKS

Scarcity is the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.

Like individuals, governments and societies experience scarcity because human wants exceed what can be made from all available resources.

People make choices because they cannot have everything they want.

Whenever a choice is made, something is given up.

OBJECTIVES

  • Students will define scarcity and opportunity cost.
  • Students will identify the opportunity cost of producing one good in terms of what is given up.
  • Students will explain production-possibilities analysis.

TIME REQUIRED

One to two class periods

MATERIALS

  • Copies of Activity 1 – 4 for each student
  • Transparencies of Activity 2 - 4
  • Scissors and glue
  • Activity 1 pdf - 19kb
  • Activity 2 pdf - 19kb
  • Visual 1 pdf - 19kb

PROCEDURE

  1. Tell students that they will become producers. Point out that producers need resources to produce goods or provide services.
  2. Give a copy of Activity 1, glue, and a pair of scissors to each student. Point out that each student has the same resources to produce squares and/or triangles. Read the instructions together and answer any questions. Allow a few minutes for students to make their squares and/or triangles.
  3. Distribute a copy of Activity 2 to each student. Display a transparency of Activity 2. Point out that the table is labeled “production-possibilities schedule” because it will show all the possibilities that each student could have produced. Tell students to complete their tables as you work on the transparency. Discuss the following.
    1. Did anyone produce only triangles? How many squares were you able to produce? (zero) In the row for Possibility A, enter “10” for the number of triangles and “0” for squares.
    2. Did anyone produce eight triangles? How many squares were you able to produce? (one) In the row for Possibility B, enter “8” for the number of triangles and “1” for squares.
    3. Did anyone produce six triangles? How many squares were you able to produce? (two) In the row for Possibility C, enter “6” for the number of triangles and “2” for squares.
    4. Did anyone produce four triangles? How many squares were you able to produce? (three) In the row for Possibility D, enter “4” for the number of triangles and “3” for squares.
    5. Did anyone produce two triangles? How many squares were you able to produce? (four) In the row for Possibility E, enter “2” for the number of triangles and “4” for squares.
    6. Did anyone produce only squares? How many triangles did you produce? (zero) In the row for Possibility F, enter “0” for the number of triangles and “5” for triangles.
      Answers for Activity 2 table
      Possibilities Number of Squares Number of Triangles Opportunity Cost per Square
      A 0 10 —
      B 1 8 2
      C 2 6 2
      D 3 4 2
      E 4 2 2
      F 5 0 2
  4. Point out that the table represents the production alternatives that are possible, hence the name production-possibilities schedule. Although each alternative was possible, each student could produce only one alternative given the limited resources.
  5. Explain that students are experiencing the basic economic problem in this activity – scarcity. Define scarcity as the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.
  6. Have students identify scarce resources used to produce squares and triangles. (students, scissors, glue, resource strips, tables, classroom, electricity, and so on)
  7. Explain that scarcity of resources necessitates decision making. Remind students that they could choose only one alternative among all possibilities. Once a production alternative is selected another alternative cannot be selected because the available resources are limited.
  8. Point out that whenever someone makes a personal decision to use limited resources (i.e., an economic choice), an opportunity cost is incurred. Opportunity cost is the highest valued alternative that must be foregone because another option is chosen.
  9. Ask students to identify the opportunity cost of producing the first square. (Two triangles must be given up.) Enter “2” in the fourth column in the row for Possibility B. Have students compute the opportunity cost of producing each additional square. (The opportunity cost of getting an additional square in terms of sacrificed triangles is always the same –two triangles.)
  10. Tell students to plot the production possibilities on the graph on Activity 2, labeling each point. Tell them to connect the points. Point out that the resulting line is called a production-possibilities curve – a graphical representation of the production possibilities.
  11. Display Visual 1 and explain that the points on the curve represent combinations of the two goods that are possible. Discuss the following.
    1. What does a producer gain by producing point C instead of point B? (one square)
    2. What is the opportunity cost of producing point C instead of point B? (two triangles)
    3. What does a producer gain by producing point D instead of point E? (two triangles)
    4. What is the opportunity cost of producing point D instead of point E? (one square)
    5. How many squares and triangles are represented by point I? (one square and four triangles)

    Note to teacher: Production-possibilities curves may be straight or curved (bowed-outward) lines. A straight line has constant opportunity costs. A bowed-outward line shows increasing opportunity costs as more of one good is produced.

  12. Explain that the production-possibilities curve represents a limit on the alternatives that can be produced because of scarce resources – each producer has only one resource strip.
  13. Have students compare points C and O and then compare points I and D. (Point C represents six triangles and two squares, and point O represents the same amount of triangles and three squares. Point I represents four triangles and one square, and point D represents the same amount of triangles and three squares.) Discuss the following.
    1. Why can any producer produce point C? (Each producer has enough resources.)
    2. If a producer produced possibility C, would the producer use all resources available? (Yes.)
    3. Would combination O be preferable to combination C? (Yes because more wants could be satisfied.)
    4. Why can’t any producer produce the combination of triangles and squares represented by point O? (There aren’t enough resources.)
    5. Can any producer choose to produce either point I or point D? (Yes, they are possible.)
    6. Why would point I be a less preferred choice than point D? (Resources are wasted. The producer is not getting as much as possible from the available resources. It is inefficient.)
    7. How might a producer be able to produce point O? (if the producer got improved technology or more resources)
  14. Point out that a production-possibilities schedule or table shows the maximum combinations of the two goods that can be produced, assuming a given state of technology and a given amount of resources. All points are possible, but only one may be chosen, just as students could only choose one combination of triangles and squares.
  15. Explain that societies experience scarcity as well as individuals. Every economy has a limited amount of resources and must make decisions about what to produce.

Closure

Review the main points of the lesson.

  1. What is scarcity? (the condition of not being able to have all of the goods and services one wants)
  2. Why does scarcity exist? (Human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.)
  3. What is opportunity cost? (the highest valued alternative that must be foregone because another option is chosen)
  4. What was the opportunity cost of an additional square in this lesson? (two triangles)
  5. Why do choices have an opportunity cost? (People must give up some desirable things in order to have more of other things because of limited resources.)

Assesment

  1. Assume that one society produces two kinds of goods (watches and doughnuts) using all its resources. If the society decides to increase the production of doughnuts, then the production of watches:
    1. Can be increased.
    2. Must be reduced.
    3. Must remain the same.

Use the following production-possibilities schedule to answer the following questions.

Cakes
(in thousands) 		Bicycles
(in hundreds)
0
1
2
3		 15
13
9
0
  1. What is the opportunity cost of producing the first one thousand cakes?
    1. 200 bicycles *
    2. 500 bicycles
    3. 900 bicycles
    4. 1500 bicycles
  2. Which of the following combinations of producing cakes and bicycles is impossible?
    1. 1000 cakes and 1000 bicycles
    2. 2000 cakes and 1300 bicycles *
    3. 2000 cakes and 500 bicycles
    4. 2000 cakes and 800 bicycles

Extension

Provide the following table to students.

Possibilities Number of Squares Number of Triangles Opportunity Cost per Square
A 0 10 —
B 1 8 2
C 2 6 2
D 3 4 2
E 4 2 2
F 5 0 2

Tell students to plot the new production-possibilities curve on Activity 2. Have students provide possible causes for a shift in the curve. (increase in resources, improved technology)

 

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