Learning Objective: Today I will be able to use common economic terms/concepts by trading off scarce items to define opportunity cost. Agenda: 1)Learning Objective 2)Lecture: Ch. 1 What is Economics? 3)Brown Bag Trade Off 4)Vocabulary Ch. 1 5)Exit Slip

What is Economics? (video)

Title Notes: CH. 1 WHAT IS ECONOMICS? Scarcity: – Ppl have unlimited wants, but not enough resources. What is an example of limited resource that is needed in CA, but it is also an unlimited want?

Productive Resources: inputs used to produce goods & services ppl. want. What is the economic problem? Why does it make choice necessary?

3 Types of Productive Resources Human Resources Natural Resources Capital Goods Labor Entrepreneur Ex.

What is Economics???? Economics: – Examines how ppl. use scarce resources to satisfy their unlimited wants What is economics?

Good: physical, requires scarce resources to produce & satisfies human wants. – Ex. Service: not physical, requires scarce resources and satisfies human wants. – Ex.

NO SUCH THING AS A FREE LUNCH – All goods is a cost to someone, b/c it takes away scarce resources from the production of other goods. Why are goods and services scarce?

What would you rather do right now instead of being in school?

Brown Bag Trade Off!!

Brown Bag Trade Off Step 1: Open your bag. Look inside. DO NOT TAKE OUT OR SHOW ANYONE!!! Step 2: You will trade with a group. Step 3: Regroup and trade again. Step 4: Reflect

Step 7: Reflect How many people made trades? What did you trade? Why? How did you feel after your trade? What was the opportunity cost of your trade? Did you trade more than once? Why? Did anyone not trade? Why? Why do people trade? Why is it NOT possible to trade without bearing a cost? What were the scarce items everyone wanted?

Opportunity cost Is an opportunity lost – value of the best alternative passed up. Sunk cost: a cost you already incurred and cannot recover, regardless what you do now. – Ignore Sunk Cost; it’s irrelevant & not recoverable Don’t cry over spilt milk! What’s done is done and move on. Time & Information – affect your decision & opportunity cost.

Economic theory – make predictions about the real world. – Assuming other things remain constant (no change) – Behavioral assumption (predict how ppl. will behave) – Rational self-interest

Marginal: incremental, extra, or one more. – Rational decision maker will change status quo as long as the expected marginal benefit from the change exceeds the expected marginal cost. – Requires information and time Marginal benefit – The extra added satisfaction Marginal cost – The extra added cost or time

Market economics: It is microeconomics, examines factors that influence individual economic choices and how markets coordinate choices of various decision makers. National economics macroeconomics, focuses on performance of the economy as a whole, especially national economics. Markets: place by which buyers & sellers carry out exchange. Thus creating supply/demand & determines price and quantity.

Circular Flow Model

Exit Slip What is YOUR opportunity cost for being here in class? My opportunity cost is _________________.