I wish that I would have taken the AP economics exam. Now I have to study in College. Economic Prospective

ECONOMICS - “Science of scarcity” choices - the study of the choices people make in an effort to satisfy unlimited needs and wantslimited resources their unlimited needs and wants from limited resources. “No horn of plenty” Scarcity The economist’s lab is the real world. They don’t have the luxury of conducting controlled experiments. Opportunity Cost Opportunity Cost Choices Economics is divided into two disciplines.

MICROECONOMICS... “Beautiful forest!. “Beautiful leaf!” MACROECONOMICS...

economy 1. Macroeconomics – concerned with the economy as a whole as a whole or with aggregates – like government, business sectors, or households. Macroeconomics is concerned with an overview of the economy overview of the economy. “forest, not the trees, Macro examines the “forest, not the trees, leaves, or specific pieces of bark.” leaves, or specific pieces of bark.” It gives “bird’s-eye view” of the economy.” us a “bird’s-eye view” of the economy.” specific 2. Microeconomics – concerned with specific economic units economic units or individual markets. Emphasis is on individual households, industries, or firms [like the # of workers employed by Ford] [Concerns the components of the economy] “trees, leaves, & pieces of bark, Micro examines the “trees, leaves, & pieces of bark, rather than the forest.”“worm’s-eye rather than the forest.” It gives a “worm’s-eye view” view” of a specific component of our economy. Great Forest! Nice bark!

I s the f ollowing Micro or Macro ? I s the f ollowing Micro or Macro ? 1. The price of digital cameras increased 5% last year. 1. The price of digital cameras increased 5% last year. 2. Unemployment was 5.4% for the U.S. workforce. 2. Unemployment was 5.4% for the U.S. workforce. 3. Unemployment in the auto industry was 8% last year. 4. Duck N ational Bank lowered its interest rates on CDs to 8%. 5. The Consumer Price Index rose to 2.7% last year. 6. The computer industry laid off 8% of its workers last year. 7. The price of gasoline rose 25% last year. Why should we study economics?

WE ALL HAVE VIRTUALLY UNLIMITED WANTS... BUT LIMITED OR SCARCE RESOURCES!

WHY DO WE HAVE UNLIMITED WANTS? BECAUSE GOODS & SERVICES PROVIDE US WITH UTILITY (SATISFACTION).

Needs (NECESSITIES) Everything we want and need requires productive resources and all resources are limited. Food Clothing Shelter Wants (Luxuries) verses

. Because resources are limited, we are forced to make choices on how to use them. Every choice we make requires a trade-off. Economics helps us make more educated choices.

Trade-offs– to get more of one thing means to accept less of another. Mustang Athlete MustangCheerleader MustangMarkette “I’m in love with both, but can have only one.” Choices are primarily marginal

Economist call a trade-off, an opportunity cost. Opportunity Cost; the amount of one product that must be given up to have or produce one more unit of another product. S carcity Choices Opportunity Costs

. Opportunity cost can be calculated by doing a marginal analysis; a comparison of marginal benefits and marginal costs. Marginal simply means extra or additional. Your economic perspective is simply a comparison between marginal costs and marginal benefits.

. As you can see economics is grounded on the assumption of “rational self-interest” (rational behavior). We all pursue actions that will enable us to achieve our greatest satisfaction. However, rational behavior is different for everyone. This means that we all make different choices. The trick is understanding which choices a person will make.

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