What is Economics? 1.What is Economics? 2.Economic Systems and Economic Tools 3.U.S. Private and Public Sectors

Discussion Question Open to page 5, read “In the News: Rich or Poor, It’s Good To Have Money.” In no less than a paragraph, answer “Think About It” in complete sentences. Be ready to share your answer.

W h y a r e y o u n o t a b l e t o o w n t h e s e i t e m s ?

What is Economics? 1.1 The Economic Problem Objectives: Recognize the economic problem, and explain why it makes choice necessary. Identify productive resources, and list examples. Define goods and services, list examples, and explain why they are scarce.

Economic Choices The Economic Problem ▫Wants are unlimited ▫Resources are scarce Scarcity – not enough productive resources available to help satisfy these wants Productive Resources – (factors of production) inputs used to produce goods and services.

Economics Defined Economics – examines how people use their scarce resources to satisfy their unlimited wants Imagine you received $50. What would you spend it on? ▫It all boils down to choices.

Productive Resources Three categories: 1.Human Resources  Human efforts (physical/mental) use to produce goods and services  Labor  Entrepreneur – profit-seeker who develops a new product or process and assumes the risk of profit or loss

Productive Resources Continued 2.Natural Resources  Renewable resources – timber, animals, etc.  Exhaustible resources – minerals, oil, water, etc.  Finite, non-renewable 3.Capital Resources  All human creations used to produce goods and services  Factories, machines, trucks, tools, building, airports, highways, etc.

Goods and Services Good – an item you can see, feel, and touch and that requires scarce resources to produce and satisfies human wants ▫Examples? Services – Something not physical that requires scare resources to produce and satisfies human wants ▫Examples?

Homework – Due Tomorrow Read section p. 4-9 and complete 1.1 worksheet. Vocabulary: ▫Scarcity ▫Productive resources ▫Services ▫Natural resources ▫Economics ▫Human Resources (labor) ▫Capital Goods ▫Entrepreneur

Discussion Question You have an important test coming up. When do you study? Where do you study? Do you study alone, with a partner, or in a group? Do you do anything else while you’re studying, such as listen to music? Listen to other student’s answers, and explain why there are so many different studying techniques.

What is Economics? 1.2 Economic Theory Objectives: ▫Explain the goal of economic theory. ▫Understand the role of marginal analysis in making economic choices. ▫Explain how market participants interact.

The Role of Theory Economic Theory – simplification of economic reality used to make predictions about the real world. Doesn’t consider every detail Assumes that all other things remain constant (ceterus paribus) Assumes people act in their own rational self- interest

Marginal Analysis Marginal – “one more;”change in an economic variable by one ▫How economics measure one’s economic decisions ▫Ex. Cookies for $.25 each ▫If the marginal benefit outweighs the marginal cost, one will make the change

Market Economics and National Economics Market Economics – microeconomics; study of economic behavior in a particular market National Economics – macroeconomics; study of the economic behavior of the economy as a whole

Market Participants Households ▫Act as consumers and demand goods and services ▫Are resource owners and supply resources (labor) to produce goods and services Firms, governments, and the rest of the world demand those resources, and use them to supply the goods and services households demand.

Markets Markets – means by which buyers and sellers carry out exchanges ▫Ex. Malls, flea markets, internet, stock market, garage sales, etc.

Circular Flow Model Illustrates the flow of resources, products, income and revenue among economic decision-makers Circular Flow Model DemonstrationCircular Flow Model Demonstration p. 16 Resource Markets Households Product Markets Firms

Homework Read p and complete 1.2 worksheet Due tomorrow

Discussion Question Write a brief description of how you spent your times yesterday evening. Then describe alternative uses of your evening that you might have considered, but rejected in favor of what you chose to do. Read “In the News: Women Continue to Move into Top Jobs,” on page 19. Answer the “Think About It” question that follows.

What is Economics? 1.3 Opportunity Cost and Choice Objectives: ▫Define opportunity cost. ▫Evaluate guidelines for making choices. ▫Analyze the opportunity cost of attending college.

Opportunity Cost Opportunity Cost – the value of the best alternative passed up for the chosen item or activity ▫Ex. What’s the opportunity cost of you taking $10 to go see a movie this Friday evening?  OC varies for everyone  OC can only be estimated

Choosing Among Alternatives Calculate opportunity cost Take into consideration what requires the most time and how much you have to offer Ignore sunk cost ▫A cost you have already incurred and cannot recover

The Opportunity Cost of College Forgone earnings Direct costs of college Additional costs of college Pain and suffering of college Weigh these costs against the potential reward of college

Homework Read p and complete 1.3 worksheet, and chapter 1 review. Due tomorrow. Quiz over chapter 1 tomorrow.