1. ECONOMICS What is it?

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

3. pg. 4 spiral Economic Reasoning Important Terms worddefinitionimage scarcity tangible intangible resources opportunity cost rationing device trade-off constraints marginal utility good

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

5. Scarcity

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

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

8. Philosophers have confronted the unlimited nature of human wants

9. Wants utility or satisfactionanything that gives us utility or satisfaction something that provides utility is a goodsomething that provides utility is a good »disutility…bad

10. What are resources? Scarcity = Wants › 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 benefits › costs –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 not price

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. Increase the Opportunity Cost-Do Less of It  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 I’m hungry. What should I do?

21. Decrease opportunity cost – Do More of it  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

22. The Global Economy Employment Benefit : wages –per unit of time Opportunity Cost = Time Leisure Forfeited Opp.Cost of a Big Mac (1994) New York 26 min. Sydney 26 min Hong Kong 28 min. Singapore 35 min London 36 min Brussels 36 min. Paris 38 min Tel Aviv 53 min. Rio 1:47 Prague 2:20

23. Scarcity Rationing Device rationing deviceBecause 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

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

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

29. 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.

30. Choices made on the margin Marginal 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

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

32. Unintended Effects intended action  effects positive unintended negative

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

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

36. Economics is the science of scarcity

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

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

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

40. 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.As my general rule, write out questions. Answers must always be in complete sentences.