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ECONOMICS

ECONOMICS. CH. ONE : WHAT IS ECONOMICS?. 1. VOLUNTARY EXCHANGE. IMAGINARY DIALOGUE BETWEEN PRODUCER AND CONSUMER WHERE $ IS EXCHANGED FOR G/S IT IS RESPONSIBLE FOR ORGANIZING HOW G/S WILL BE PRODUCED & DISTRIBUTED Here’s what it would look like if it wasn’t imaginary….

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ECONOMICS

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  1. ECONOMICS CH. ONE: WHAT IS ECONOMICS?

  2. 1. VOLUNTARY EXCHANGE • IMAGINARY DIALOGUE BETWEENPRODUCERAND CONSUMER WHERE $ IS EXCHANGED FOR G/S • IT IS RESPONSIBLE FOR ORGANIZING HOW G/S WILL BE PRODUCED & DISTRIBUTED • Here’s what it would look like if it wasn’t imaginary…

  3. LET’S TAKE A LOOK AT NUTTY CHOCOLATE BARS… (Ch. 1: Nutty Bar Wksht.)

  4. 2. WHERE DO MARKETS EXIST? • ANYWHERE THAT VOLUNTARY EXCHANGE TAKES PLACE

  5. 3. DEFINE GOODS/SERVICES • GOODS: ANYTHING THAT YOU CAN SEE OR TOUCH (TANGIBLE) ~ PIZZA, REFRIGERATOR, GAS • SERVICES: ANYTHING THAT YOU CAN NOT SEE OR TOUCH (INTANGIBLE) ~ PIZZA DELIVERY,REFRIGERATOR REPAIR SERVICE, FULL-SERVICE GAS STATION

  6. 4. SCARCITY • NOT ENOUGH RESOURCES TO SATISFY EVERYONE’S WANTS AND NEEDS

  7. 5. 4 PRODUCTIVE RESOURCES • NATURAL: TREE, SUNLIGHT, WATER • HUMAN: MANUAL, MENTAL LABOR • CAPITAL: ANY G/S USED IN THE PRODUCTION/DISTRIBUTION OF ANOTHER G/S (TRUCK, COMPUTER, MACHINE PRESS) • ENTREPRENEURSHIP: A RISKTAKER WHO CREATES A NEW G/S OR EXPANDS ON AN EXISTING ONE (BILL GATES, DONALD TRUMP, JAY-Z) • TRY AND THINK OF A G/S THAT DOESN’T USE ALL 4 IN IT’S PRODUCTION AND/OR DISTRIBUTION PROCESS(EXTRA CREDIT IF U CAN)

  8. LET’S TRY SOME KELLOGGS CORN FLAKES (ESL p. 4)

  9. 6. ECONOMICS • THE STUDY OF PRODUCERS AND CONSUMERS ENGAGING IN VOLUNTARY EXCHANGE IN MARKETS WHERE $ IS EXCHANGED FOR G/S THAT ARE MADE FROM SCARCE RESOURCES

  10. 7. OPPORTUNITY COST • THE NEXT BEST THING YOU COULD DO/BUY INSTEAD OF WHAT YOU CHOSE TO DO/BUY • EX.: IF I HAD $5.00 AND CHOSE TO BUY McDONALD’S INSTEAD OF TACO BELL, THAN TACO BELL BECOMES THE OPPORTUNITY COST OF BUYING McDONALD’S

  11. 7. OPPORTUNITY COSTS • MORE EXAMPLES: • IF I HAD $120.00 AND BOUGHT A PAIR OF TIMBERLANDS INSTEAD OF A PAIR OF NIKE, THAN THE NIKE PAIR HAVE BECOME MY OPPORTUNITY COST FOR BUYING THE PAIR OF TIMBERLANDS

  12. ESL p. 6 (question #6) • Microwave Ovens -500,000 = equipment -200,000 = production costs/year -700,000 = deficit +225,000 = projected annual sales -475,000 = deficit after year 1 sales +25,000 profit/year (225,000 – 200,000) * it will take 19 years to break even; 20 years to make a profit ($25,000.00) • U.S. Treasury Bonds -500,000 = investment +50,000 = interest check government will pay at end of year 1 -450,000 = deficit at end of year 1 +50,000 = interest payments each year * it will take 9 years to break even; 10 years to make a profit ($50,000.00)

  13. 8. TRADE OFF DECISION DOING/BUYING A LITTLE LESS OF ONE THING SO YOU COULD DO/BUY A LITTLE MORE OF SOMETHING ELSE.

  14. EXAMPLE: • WALKING THRU THE FOOD COURT AT GREAT LAKES MALL WITH $7.00 • WANTING TO BUY 2 GORDITAS, AND A 7-LAYER BURRITO AND A PEPSI FOR AROUND $6.00 • ALSO WANTING TO BUY 2 CHICK FIL-A SANDWICHES, AN ORDER OF LARGE WAFFLE FRIES AND A COKE FOR AROUND $6.00 • T.O.: BUYING 1 GORDITA, 1 BEAN BURRITO, 1 CHICK FIL-A SANDWICH AND A COKE FOR AROUND $7.00

  15. EXAMPLE: • WALKING INTO FYE AT GREAT LAKES MALL WITH $25.00 • WANTING TO BUY THE NEW YOUNG JEEZY CD “HOLLA AT YA” FOR $19.99 • ALSO WANTING TO BUY KANYE WEST’S NEW CD “SHAMA LAMA DING DONG” FOR $15.99 • T.O.: BUYING AN ILLEGAL ‘BURNT’ CD FOR EACH AT $10.00 A POP

  16. LAST EXAMPLE: • WALKING INTO CVS WITH $10.00 • WANTING TO BUY A BOTTLE OF TUMS FOR $6.99 • ALSO WANTING TO BUY A LARGE BOTTLE OF EX-LAX FOR $8.99 • T.O.:BUYING A ROLL OF TUMS FOR $.89 AND THEN BUYING A SMALL BOTTLE OF EX-LAX FOR $4.99

  17. We’re out! I told you to get some on your way home from work HEY HONEY! WHERE’S THE DAMN TOILET PAPER? Ahhh crap! That’s just great! Looks like this Reader’s Digest will have to do

  18. 9. How does a smart consumer/producer know when to stop doing/buying one thing and start doing/buying the other thing when making a trade-off decision • When the cost of doing/buying the first thing starts to outweigh its benefits • COST – BENEFIT ANALYSIS • Ex.: I don’t have much time to get ready in the morning and if I am done pooping and continue to sit on the toilet, that’s not good cost-benefit analysis.

  19. LET’S GO OVER ESL pp. 8 - 9

  20. 10. Define Production-Possibility Curve11. What type of decision does it illustrate? • A curve/graph illustrating the maximum production possibility combinations between doing/buying 2 things • It illustrates a Trade-off Decision

  21. LET’S GO OVER ESL p. 7

  22. Example: a PPC of a trade-off between building highways or aircraft carriers H 900 I G 600 H W 300 A Y 0 1 2 3 AIR CRAFT CARRIERS

  23. Example: a PPC of a trade-off decision between studying 4 Economics &Geometry (120 minutes total) 105 90 75 G60 45 30 15 0 15 30 45 60 75 90 105 E

  24. Ilene Dover is an industrial Tech. teacher at Richmond Hts. High School. She is struggling to find the right combination of ‘project time’ vs. ‘clean-up time’ for her students. Help her make a PPC for her 60 min. class. Make 3 combinations

  25. Example: a PPC of a trade-off between minutes spent ‘working on project’ & ‘room clean-up P 60 R O 40 J E 20 C T 0 20 40 60 ROOM CLEAN-UP

  26. Example: a PPC of a trade-off decision between producing an Arion 35Z PC and an Arion 35X Laptop ($500,000.00) 25 x $5,000.00 = $125,000.00 $500,000.00 - $125,000.00 = $375,000.00 (37.5 x $10,000.) A 100 35Z 75 50 25 100 x $5,000.00 = $500,000.00 This means that they can not make any laptops (0) 50 x $10,000.00 = $500,000.00 This means that they can not make any Arion 35Z’s(0) 75 x $5,000.00 = $375,000.00 $500,000.00 - $375,000.00 = $125,000.00 (12.5 x $10,000.) 0 1012.5 20 30 37.5 40 50 Arion35X Laptop

  27. Example: a PPC of a trade-off decision between studying 4 Economics &Geometry (120 minutes total) 105 90 75 E60 45 30 15 0 15 30 45 60 75 90 105 G

  28. 12. How does ‘Voluntary Exchange’ answersthe 3 questions all econ. Systems strive toanswer? • What g/s will we produce? • Those g/s that consumers want • How will we produce them? • Producers will make them as efficiently as possible (high quality/low price) • Who will receive them once they are done? • Whoever can afford them

  29. LET’S BEGIN CH. 1: PPC WKSHT.

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