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Today’s Warm Up

Today’s Warm Up. Pick up and complete the questionnaire at the front of the room – “Do You Think Like an Economist?”. Basic Economic Concepts. Today’s LEQ : Why should we care about economics?. What is Economics?. The science of scarcity - unlimited wants, limited resources

bernard-casey
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Today’s Warm Up

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  1. Today’s Warm Up • Pick up and complete the questionnaire at the front of the room – “Do You Think Like an Economist?”

  2. Basic Economic Concepts Today’s LEQ: Why should we care about economics?

  3. What is Economics? • The science of scarcity- unlimited wants, limited resources • Scarcity forces us to make choices • Economists study how individuals and societies deal with scarcity

  4. Comp. Check • Which is more important to survival – diamonds or water? Which is more expensive and why? • How much does a ticket cost for a regular season Phillies game? What about in 2008 when the Phillies made it to the World Series? In terms of scarcity, explain why the price increased.

  5. Trade-Offs • ALL decisions involve trade-offs – the alternatives we give up whenever we choose one course of action over others (There is no such thing as a free lunch!) • Opportunity cost – the most desirable alternative given up • i.e. sleep, study, fun example

  6. Micro vs. Macro • MICROeconomics – study of small economic units such as ind’ls, firms, industries • MACROeconomics – Study of the LARGE economy as a whole or in its basic subdivisions (national economic growth, unemployment, etc.)

  7. How is economics used? • Theoretical Economics – scientific method used to make generalizations & abstractions to develop theories • Policy Economics – theories applied to fix problems or meet economic goals • Positive vs. Normative: • Positive Statements – based on facts. Avoids value judgements(what is) • Normative Statements – includes value judgements(what ought to be)

  8. Marginal Analysis • In economics, marginal = additional • “Thinking on the margin” or marginal analysis involves making decisions based on the additional benefit vs. the additional cost

  9. In Summary: Five Key Economic Assumptions • Society’s wants are unlimited, but ALL resources are limited (scarcity). • Due to scarcity, choices must be made. Every choice has a cost (a trade-off). • Everyone’s goal is to make choices that maximize their satisfaction. Everyone acts in their own “self-interest.” • Everyone acts rationally by comparing the marginal costs and marginal benefits of every choice • Real-life situations can be explained and analyzed through simplified models and graphs.

  10. Homework – Due by Thursday • Read Chapter 1 in the Mankiw text • Add to your class notes as you read. • Complete the AP Microeconomics Pre-Test (no stressing!)

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