1. IB/AP Economics (Grade 11)

2. Approach to this course
Carpe Diem – “seize the day” Horace (23 BC)
Yes we can! Barack Obama (2008)
...
That you are here—that life exists and identity, That the powerful play goes on, and you may contribute a verse. Walt Whitman (1900)
You (really) don’t know anything until you apply it to the real life circumstances and challenges Andreas Schleicher (2003)

3. What on earth is ECONOMICS???
Let’s first explore, inquire, derive it ourselves before we dive into the textbook (relatively boring : )
Look at Keynes’
quote on handout

4. Logistics But “As” are scarce relative to wants
Year 1 of the 2 year IB Economics Program
Optional AP Microeconomics exam in May, 2017
The 2 year program will culminate with the IB Exam in May, 2018
Worth doing well, as you can opt out of many first year college economics classes!
Assessments and Grading:
Test per chapter/sections
Homework and take home assignments (would help you prepare for the tests)
Final Grade: Semester 1 (35%), Semester 2 (45%) and Final Exam (20%)
However, for each assessment only one student can receive an A grade and all other students will get a C grade.
How should the student who receives the A grade be determined?
But “As” are scarce relative to wants
If you need special accommodation doing tests, please let me and Mr. So know as soon as possible
Please take notes on a notebook and/or handouts (not on PCs )
Initially, use textbook to prepare, to review and look up various economic terms (at-home copy available if needed….see me)

5. Key Questions
Who are the key people, agents, organizations, institution, etc. making decisions in this economy/society?
What are their objectives and goals? (What do they want and what are they trying to do?)
How do they interact?
Where and how do you fit into this picture? (How does it affect you and why does it matter?)

6. Who are these people ?

7. What about these people?

8. And what about these people and organizations?

9.  Shipwreck!
Activity in groups Group III Mon

10. Lesson Two :Brief Summary of the Economic PROBLEM
KEY TERMS from INDUCTION LESSON RESOURCES consist of …………….., …………………., ……………….., and ……………………….. OUTPUT Scarcity (of resources) WANTS>RESOURCES 3) Choices must be made: how shall the scarce resources be allocated ? 4)What are the COSTS of choosing one allocation rather than another? 5) Standard of living: the idea of foregoing consumer goods now in order to produce more capital goods and have a higher standard of living in the future 6) Equity versus Efficiency: 7) On your own OR with other people: which is better?

11. The Economic Problem: SCARCITY
Limited (Finite) Resources
Unlimited (Infinite) Human Wants & Needs
Choices  Opportunity Cost

12. As consequence of the Economic Problem…
We have to make a choice
Comes with a cost  called Opportunity Cost
People cannot have everything that they desire and so there must be some system for rationing the scarce resources. This is where economics come in. It is a study of rationing/distribution (choice making) systems. It is the study of how scarce resources are allocated to fulfill the infinite wants of consumers.

13. The THREE essential questions of Resource Allocation
Economic decisions, (choices with opportunity costs) that the economy must make are as follows:
What to produce: all economies, societies and countries must CHOOSE/DECIDE what particular goods/services (G/S) and in what quantities they wish to produce. e.g. given the scarce resources, how much cars, bikes, PCs, wheat, corn? Japan – …………., Switzerland – …………….., Saudi – …………
How to produce: all economies, societies must make CHOICES on how to use their resources in order to produce goods and services. G/S can be made with different combination of resources (machines, skills, technology) e.g. shoes be made by machines or hand? Crops using fertilizers or organically?
For whom to produce: all economies must make CHOICES how the G/S produced are distributed among the population. Should everyone get a equal amount or some more than others? Should some g/s be (re)distributed more equally(e.g. …………………) ? Should lawyers be paid more than teachers? Prime minister more than university head?

14. Two Main Allocation Systems: methods of rationing
Planned economy: (command economy), the what, how and for whom to produce are made primarily by the government. All resources are collectively owned, government arrange all production set wages and prices.
Free market economy, All production is in the private sector and markets are left free to set wages and prices. Individuals make decisions about what products they would like at given prices and producers make decisions whether to provide them on the likelihood of whether they will make profits. Consumers have the power and sovereignty to send signals as to what they want. It is a self-righting system, suggested by Adam Smith, with an invisible hand in the form of prices. Theoretically, competition and pursuit of self interest will lead to efficient allocation of resources (no waste)  advocates for no government intervention (laissez faire)
Today in real world, most countries are mixed economies

15. Goods and services “ECONOMIC GOODS & SERVICES”
Wants and needs
Needs are things we must have to survive such as food, shelter, clothing
Wants are things that we would like to have but not necessary for immediate survival e.g. iphone, tv
Goods and services “ECONOMIC GOODS & SERVICES”
Goods are physical tangible objects e.g. vegetable, meat, cars, books, etc.
Services are non-physical, intangibles e.g. catering, repairs, haircuts, entertainment, education, insurance
Consider definition of an economic good and of a FREE good using discussion questions on the H/O
Consider calculation of opportunity cost using discussion questions on the H/O

16. Final introductory concept……..
Economics think about the economic world in two ways, 1) describes what is actually going on and 2) how things out to work
Positive economics – are factual statements, statements that are right or wrong e.g. UE of china this year is 4.2%
Normative economics – based on opinion, beliefs and cannot be proven right or wrong, subjective, what ought to be or should be

17. Positive vs Normative statements Which statements can be judged as true/false? Which cannot?
The administration will allow FACEBOOK to be used in lessons
The administration ought to allow FACEBOOK to be used in school
The administration does not allow FACEBOOK to be used in school

18. Group III Which statements are positive and which are normative?
The distribution of income in the USA should be made more equal
The taxation system can be used to make the distribution of income more equal
The distribution of income in the USA is more unequal than the distribution of income in Japan
The distribution of income in the USA has become more unequal in recent years
Group III go back

19. Which actions are positive and which are normative?
ANALYSIS of economic outcomes
FORECASTING of economic outcomes
POLICY SUGGESTIONS for economic outcomes
DESCRIPTIONS of economic outcomes

20. Summary of Induction lessons
Economics arises from the conflict between unlimited wants and limited (finite,) resources scarcity. Since people cannot have everything they want, they must make choices. Societies must choose how much of each good (and services) they want given their scarce resources. They need an efficient allocation of resources.
Economics is a study of decision making and choices opportunity cost
Opportunity cost is the next best alternative forgone (sacrificed) when an economic decision is being made. It is what you give up in order to have what you choose e.g. IB course selection, dilemmas in shopping, apple or samsung phone, etc. You have already confronted many opportunity costs.
But some things do not have an OC to consume e.g. air (or is it)? Salt water. You are not paying or giving up anything else to get it FREE GOODS (eg autumn leaves, cherry blossoms).

21. The Job of Economists as Social Scientists (Economics is a social science, which overlaps with History, Psychology, …
Social scientific method
Step 1: make observations of the world around us, and select an economic question we need to answer
Step 2: identify variables we think are important to answer the question
Step 3: make a hypothesis/theory/MODEL about how the variables are related to each other (cause and effect, if … then statement)
Step 4: make assumptions. Ceteris Paribus “all other things equal/constant”
Step 5: collect data and empirically test the hypothesis to see if it fits with what actually happens in the real world
Step 6: compare the predictions of the hypothesis with the data and real world outcomes. Validate or invalidate your hypothesis and theory

22. We are complex and dynamic organisms need MODELS!