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ECONOMICS

ECONOMICS. What is it?. on p. 2 of your spiral…. Economics is …. pg. 4 spiral Economic Reasoning Important Terms. Economic Reasoning An Economic Way of Thinking. Reference Chapter 1.1-2. Scarcity. next available page : Economic Reasoning Basic Economic Principles.

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ECONOMICS

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  1. ECONOMICS What is it?

  2. on p. 2 of your spiral…. Economics is …

  3. pg. 4 spiralEconomic Reasoning Important Terms

  4. Economic Reasoning An Economic Way of Thinking Reference Chapter 1.1-2

  5. Scarcity

  6. next available page:Economic ReasoningBasic Economic Principles Scarcity = Wants › Resources Scarcity is the condition where our wants are greater than our resources “None of us can have as much as we want of everything we want” --Oliver Wendall Holmes What are wants????

  7. tangible intangible Economists claim that wants are unlimited. Do you agree? Why/why not?

  8. Philosophers have confronted the unlimited nature of human wants

  9. Wants • anything that gives us utility or satisfaction • something that provides utility is agood • disutility…bad

  10. Scarcity = Wants › Resources • What are resources?

  11. Resources • what’s needed to produce a good or service

  12. Scarcity Choices • Because there is scarcity, choices have to be made. • personal • communally • nationally • globally • Choices are made be examining the costs and benefits of each option • a person will generally or always choose the option where benefits › costs

  13. Choice Opportunity Cost • When a choice is made, an opportunity cost is incurred. • Opportunity Cost = • “the most valued alternative” • what you would have done • your next most valuable alternative • what you gave up to do what you did • not what you could have done • notprice

  14. Record 3 decisions you have recently made. Next to each, record the opportunity cost.

  15. Let’s Make a Deal!!!

  16. Choices have to be made! • Door #1--Phantom? OR • Door #2 A house inVista $300,000 • Honda Accord MSRP of $25,000 • Gas allowance of $3,000 • Monthly allowance for shopping of $1,000 for 1 year OR • Door #3--A $340,000 trip around the world

  17. When you forgo doing homework to get on Facebook, your opportunity cost for getting on Facebook was your homework. • Your choice. Your opportunity cost

  18. Is the opportunity cost for attending high school the same for all students?

  19. Changes in opportunity costs change behavior Increase opportunity cost do less of it Decrease opportunity cost do more of it

  20. Decision Eat at Jack-In-The-Box You’ll do less of this. Opportunity Cost Eat at Mc Donald’s High Opportunity Cost MacDonald’s reduces prices More choices added at Mickey D’s Certified Cleanest Fast Food Restaurant in SD County Increase the Opportunity Cost-Do Less of It I’m hungry. What should I do?

  21. Decision Eat at Jack-In-The-Box You’ll do more of this. Opportunity Cost Eat at McDonald’s Low Opportunity Cost McDonald’s raises prices Only serves strawberry shakes E. Coli outbreak Decrease opportunity cost – Do More of it

  22. The Global Economy Employment • Benefit : wages • per unit of time • Opportunity Cost = Time Leisure Forfeited • Opp.Cost of a Big Mac (1994)

  23. Scarcity Rationing Device • Because there is scarcity there must be a rationing device • a means of deciding who get what and how much of available resources or goods.

  24. Rationing device

  25. Scarcity Competition • Because there is scarcity, we can infer there will be competition

  26. More Ways to Think Like an Economist • trade-offs • decisions made on the margin • unintended consequences

  27. Another consequence of scarcity Trade-offs • More of one thing frequently means less of something else. • Trade-0ff = when more of one thing necessarily means less of something else.

  28. Choices made on the marginMarginal choices made by comparing marginal costs to marginal benefits • What will be the costs/benefits of doing/making/buying a bit more? • What would be the marginal cost or benefit of studying 1 more hour? • buying another hamburger? • spending another hour at the beach? marginal : additional

  29. Has anything ever turned out differently than you intended?

  30. Unintended Effects

  31. Pollution Rent control laws Interstate highway and demise of public transit

  32. on p. 2 of your spiral…. Economics is …

  33. Economics is the science of scarcity

  34. Economics is the study of scarce resources that have alternative uses

  35. Economics is the study of cause and effect relationships based on wants and resources.

  36. Economics is … the science that studies the choices of people trying to satisfy their wants in a world of scarcity

  37. Homework: • Review text Ch1.1 and 1.2, pgs. 4-17, as needed. • spiral page titled Thinking Like An Economist • p. 13 #6 • p. 20 #3-7 (This requires you to read p.19-20) • p. 12 “Question To Answer” • p. 18 “Question To Answer” • Complete Economic Reasoning Important Terms • As my general rule, write out questions. Answers must always be in complete sentences.

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