August 28th, 2014 AP Microeconomics Attendance Current Event? Notes: Economics Intro (Ch.1)

Ch. 1 Economics Introduction T.I.N.S.T.A.A.F.L. “There is no such thing as a free lunch.” Every action costs someone time, energy, money, or the opportunity to do something else instead! Define economics: ______________________ The study of how individuals, institutions, and society make the best choices under conditions of scarcity. Limited goods, services, land, equipment, labor, and talent. What is the “Economic Way of Thinking?”

Ch. 1 Economics Intro Cont. People make decisions on what they believe is important to them based on costs, incentives, and happiness. Subjective Value (Everything has a cost; People choose for good reasons to buy them) Incentives matter Fast Food Restaurant Example… People gain from voluntary trade Economic thinking is marginal (extra, one-more) thinking (evaluate whether the benefit of one more unit of something is greater than its cost.) Examples? Diamond Ring example… The price of a good or service is affected by people’s choices.

Ch. 1 Economics Intro Cont. Economics relies on the scientific method. Observing Forming hypothesis Testing Evaluating Decision Time Economic Principle: Well tested and widely accepted economic theory. Generalizations Other-things-equal-assumption Graphical Expression