1. Today’s Warm Up
Pick up and complete the questionnaire at the front of the room – “Do You Think Like an Economist?”

2. Basic Economic Concepts
Today’s LEQ: Why should we care about economics?

3. What is Economics?
The science of scarcity - unlimited wants, limited resources
Scarcity forces us to make choices
Economists study how individuals and societies deal with scarcity

4. Comp. Check
Which is more important to survival – diamonds or water? Which is more expensive and why?
How much does a ticket cost for a regular season Phillies game? What about in 2008 when the Phillies made it to the World Series? In terms of scarcity, explain why the price increased.

5. Trade-Offs
ALL decisions involve trade-offs – the alternatives we give up whenever we choose one course of action over others (There is no such thing as a free lunch!)
Opportunity cost – the most desirable alternative given up
i.e. sleep, study, fun example

6. Micro vs. Macro
MICROeconomics – study of small economic units such as ind’ls, firms, industries
MACROeconomics – Study of the LARGE economy as a whole or in its basic subdivisions (national economic growth, unemployment, etc.)

7. How is economics used?
Theoretical Economics – scientific method used to make generalizations & abstractions to develop theories
Policy Economics – theories applied to fix problems or meet economic goals
Positive vs. Normative:
Positive Statements – based on facts. Avoids value judgements (what is)
Normative Statements – includes value judgements (what ought to be)

8. Marginal Analysis In economics, marginal = additional
“Thinking on the margin” or marginal analysis involves making decisions based on the additional benefit vs. the additional cost

10. In Summary: Five Key Economic Assumptions
Society’s wants are unlimited, but ALL resources are limited (scarcity).
Due to scarcity, choices must be made. Every choice has a cost (a trade-off).
Everyone’s goal is to make choices that maximize their satisfaction. Everyone acts in their own “self-interest.”
Everyone acts rationally by comparing the marginal costs and marginal benefits of every choice
Real-life situations can be explained and analyzed through simplified models and graphs.

11. Homework – Due by Thursday
Read Chapter 1 in the Mankiw text
Add to your class notes as you read.
Complete the AP Microeconomics Pre-Test (no stressing!)