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The 7 Principles of Economic Thinking

The 7 Principles of Economic Thinking. Essential Question. How do you think like an economist?. Today’s Agenda. Anticipation guide—before the lesson 7 Economic Principles—Text pg. 6-11 Power Point and discussion Anticipation guide—after the lesson Cost-benefits analysis group activity.

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The 7 Principles of Economic Thinking

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  1. The 7 Principles of Economic Thinking

  2. Essential Question • How do you think like an economist? Today’s Agenda • Anticipation guide—before the lesson • 7 Economic Principles—Text pg. 6-11 • Power Point and discussion • Anticipation guide—after the lesson • Cost-benefits analysis group activity

  3. LET’S REVIEW THESE TERMS • Scarcity • Tradeoff • Cost • Benefit • Incentive • Market

  4. PRINCIPLE #1 Scarcity Forces Tradeoffs The inability to satisfy all wants at the same time; the NEEDS are greater than the RESOURCES SCARCITY … but Resources are Limited People have Unlimited Wants… Food Clothing Shelter Schools Hospitals Cars Transportation Land Soil Minerals Fuels People Money Technology

  5. PRINCIPLE #1 Scarcity Forces Tradeoffs SCARCITY forces us to choose which needs and wants to satisfy with available resources. Stop after “guns or butter” example http://www.youtube.com/watch?v=zCxPPu6AwgM&list=PL3701F0422470356F

  6. PRINCIPLE #1 Scarcity Forces Tradeoffs In other words, a TRADEOFF is your choice to come to school today, knowing you are giving up sleep. Time is a limited resource (even if you are a billionaire, you still only have 24 hours in a day!) By choosing to spend 8 hours in school today, you are giving up the 8 hours you would have spent sleeping if you had not chosen to come today. GOOD CHOICE, BTW

  7. PRINCIPLE #2 Costs vs. Benefits As economists, we assume that choices are made based on expected costs and benefits

  8. PRINCIPLE #2 Costs vs. Benefits When people weigh the costs (money, time, effort, energy, some other sacrifice) against the perceived gain(money, time, experience, other improvement), this is known as a COST-BENEFITS ANALYSIS Every choice has a COST. Think About It… When you chose to come to school, what was your cost? And if you had chosen to stay home and sleep…?

  9. PRINCIPLE #2 Costs vs. Benefits What’s Jerry’s COST-BENEFITS ANALYSIS ? http://yadayadayadaecon.com/clip/7/

  10. PRINCIPLE #3 Thinking at the Margin Stop @ 1:15 http://www.youtube.com/watch?v=Ml8_IQ3Cnrs

  11. PRINCIPLE #4 People Respond to Incentives Who wants to take a walk? Incentives can be … MOTIVATING DETERRING

  12. PRINCIPLE #5 Trade Makes People Better Off http://www.youtube.com/watch?v=Hh8hS8uSoJs

  13. PRINCIPLE #6 Markets Coordinate to Trade http://www.youtube.com/watch?v=ibJHFCEUcoE

  14. PRINCIPLE #7 Future Consequences Count http://www.youtube.com/watch?v=nWJut7KQhI4

  15. COST-BENEFITS ANALYSISACTIVITY • Once you have been placed in your group, look at the economic choice on your poster. • What are the costs? Write those on one color and place those on the LEFT side of the sheet. • What are the benefits ? Write those on the other color and place those on the RIGHT side of the sheet. • At the bottom (in either color) write down what incentives there are to your choice. • Be prepared to discuss as a class.

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