1. Economics

2. Economic Reasoning: Why are We A Nation of Couch Potatoes?
Welcome to the exciting world of economics!
Definition: The social science that deals with how society allocates scarce resources among its unlimited wants and needs by examining alternatives and considering the opportunity costs for each alternative
Economic reasoning can be used to explain a wide range of human behavior.

3. Why are We A Nation of Couch Potatoes?
Which well known people do Americans tend to admire?
How are Americans’ exercise and diet habits changing?

4. Why are We A Nation of Couch Potatoes?
On the one hand, Americans admire people who look slender and physically fit.

5. Why are We A Nation of Couch Potatoes?
On the other hand, according to the Center of Disease Control and Prevention
~25% of Americans are getting enough exercise
~35% are overweight
Percentage of children who are overweight has doubled since the early 1970s

6. Why are We A Nation of Couch Potatoes?
Economic Mystery: Why do an increasing number of Americans, the same people who admire the trim, slender look so often featured in the media, exercise too little and eat too much?

7. True or False?
Few Americans know that exercising more and eating less can help many people become healthier.
Exercise and a healthful diet are free.
In jobs that involve physical work, exercise is like a fringe benefit.
The price of food has been increasing.
Passive modes of entertainment like-TV and video games-are popular.
Common jobs in the past-in mining, farming, and manufacturing-were much safer than today’s jobs in technology, law and finance.

8. Solve the Mystery!
Read Activity 1 and answer the questions on a separate sheet of paper (10 minutes).

9. Guide to Economic Reasoning
People choose.
People’s choices involve costs.
People respond to incentives in predictable ways.
People create economic systems that influence economic choices and incentives
People gain when they trade voluntarily.
People’s choices have consequences that lie in the future.

10. Applying Economic Reasoning to Couch Potatoes!
What are some of the costs associated with failure to exercise enough and being overweight?
What incentives might influence people to exercise less and eat more?
How might you solve the mystery?
What are some ways to change the incentives associated with exercise and diet?’

11. Applying Economic Reasoning to Couch Potatoes!
Periods 1,3,4 Homework: Read the following articles and come prepared to discuss them. Please also print them out. “Watering the Food Desert” and “Not Too Rich or Too Thin” posted on my website.
Period 2: Read the following articles and come prepared to discuss them. Please also print them out." Disparities in Obesity Prevalence Due to Variation in the Retail Food Environment” and “Self Regulation and the Response to Concerns About Food and Beverage Marketing to Children in the United States” posted on my website.

12. Article Tasks Step 1 Please read and code your assigned article.
Put an * by any material you think is a main idea.
Put an ! by any material you think is surprising or interesting.
Put a ? by any material you do not understand/have questions about.

13. Article Tasks Step 2
Get in groups of 4 people with the same article and answer the questions about your article.

14. Article Tasks Step 3
Find a partner who did not read the same article as you and do the following:
Summarize the article for your partner.
Identify and explain at least one item from each coding category (*,!, ?)
Explain how your article relates to the Couch Potato lesson (Does it contradict or support the lesson? How and why?)

15. Key Idea #1: Scarcity Chief economic problem—faced in all societies
Condition of having to choose among alternatives
Idea of limited resources and unlimited wants and needs
Scarce good versus free good

16. Key Idea #2: Choice Scarcity leads us to choose between alternatives
Choices are on an individual (micro) and societal (macro) level
Three economic questions
What should be produced?
How should goods and services be produced?
For whom should goods and services be produced?

17. Review:
Economic Reasoning Principle #1: People choose, and individual choices are the source of social outcomes.
Scarcity necessitates choices: not all of our desires can be satisfied. People make these choices based on their perceptions of the expected costs and benefits of the alternatives.

18. Key Idea #3: Opportunity Cost
Definition: the value of the best alternative forgone when making any choice
Most important concept in economics
TINSTAAFL

19. Opportunity Cost:
Choices impose costs; people receive benefits and incur costs when they make decisions.
The cost of a choice is the value of the next-best alternative foregone, measurable in time or money or some alternative activity given up.

20. SCARCITY CHOICE How Do You Know When Scarcity Forces You to CHOOSE
Something Is Scarce?
Scarcity Forces You to
CHOOSE
SCARCITY CHOICE

22. Opportunity Cost: the foregone alternative
Think: “next-best”

23. Scarcity IS: Even in the face of abundance . . .
What’s scarce when you’re
in the Mall of America?
at the all-you-can-eat buffet?

24. Opportunity Cost = the Next-Best Alternative
Identifying Opportunity Cost:
What are the considered alternatives?
Prioritize the alternatives – What is the best and what is the “next-best”?
What would you do – not what could you do?
What does the decision-maker perceive to be the benefits of each alternative?

25. People’s Choices are always RATIONAL
Rational choice = choosing the alternative that has the greatest excess of benefits over costs.
If ALL choices are rational, then the challenge is to understand the decision-maker’s perception of costs and benefits.

26. Opportunity Cost Analysis
What was the 1st decision you made this morning?

27. Opportunity Cost Analysis
What was the 1st decision you made this morning?

28. Opportunity Cost Analysis
Decision Maker: YOU
Alternatives:
Get Up Now
Don’t Get Up Now
Perceived Benefits
Choice
Opp. Cost
Benefits Refused

29. Opportunity Cost Analysis
Decision Maker: YOU
Alternatives:
Get Up Now
Don’t Get Up Now
Perceived Benefits
Shower bkfst
don’t rush
On time coffee
Choice
Opp. Cost
Benefits Refused
More sleep

30. Opportunity Cost Analysis
Decision Maker: YOU
Alternatives:
Get Up Now
Don’t Get Up Now
Perceived Benefits
Shower bkfst
don’t rush
On time coffee
Choice X
Opp. Cost
Benefits Refused
More sleep X

31. Opportunity Cost Analysis
Decision Maker: YOU
Alternatives:
Get Up Now
Don’t Get Up Now
Perceived Benefits
Shower bkfst
Coffee don’t rush
On time
Choice X
Opp. Cost
Benefits Refused
More sleep

32. Use the concept of opportunity cost to discuss the following questions:
Who might choose to get bumped from a flight?
Should Tiger Woods mow his own lawn?
What is the cost of attending college?
for LeBron James?
for you?

33. People respond to incentives in predictable ways.
Choices are influenced by incentives, the rewards that encourage and the punishments that discourage actions. When incentives change, behavior changes in predictable ways.
Incentives may be positive or negative.
Incentives may be monetary or non-monetary.

34. Why study economics? Affects daily lives
Helps us to make informed decisions
Helps us become more effective citizens

35. The Economic Way of Thinking: What differentiates economics from other social sciences?
Economists emphasize the role of opportunity costs in analyzing choice
Opportunity cost versus opportunity benefit (what is gained by making a particular choice)
Expected benefits of alternatives will affect choices
As set of alternatives change, choices change

36. The Economic Way of Thinking: What differentiates economics from other social sciences?
Motivation for choices is to maximize value of some objective/and objectives defined by self interest
Business owners motivation is to maximize profit
Consumers make choices to maximize satisfaction (utility)
Self interest doesn’t necessarily mean that people are greedy/selfish

37. The Economic Way of Thinking: What differentiates economics from other social sciences?
Motivation for choices is to maximize value of some objective/and objectives defined by self interest
Economists study all sorts of choices: how people choose life partners, voting, drug use etc.
Decision making matrix
Define problem
List the alternatives
List the criteria used to evaluate your alternatives
Evaluate the alternatives
Choose the best alternative

38. The Economic Way of Thinking: What differentiates economics from other social sciences?
Individuals maximize choices by using marginal decision making
Margin—current level of activity
Marginal decision making– deciding to do a little more or a little less of something

39. Microeconomics/Macroeconomics
Microeconomics branch of economics that examines the choices and interaction of individuals concerning one product, firm, or one industry (how individual producers and consumers respond to changes in market)
Macroeconomics the branch of economics that examines the behavior of the whole economy at once unit of analysis not individual but economy as a whole

40. Micro or macro? You decide
Comparing unemployment rates of Germany and the United States
How the price of milk is determined
The impact of preservation of wilderness areas on the logging industry and on the price of lumber
Increases in US consumer demand

41. Importance of Economic Theory
Theory: simplified description of reality
Why is theory important even if it is sometimes incorrect or can’t predict outcomes 100% of the time?
Model: simplified form of reality which shows the relationship between different factors
Economic theory simplifies reality

42. Ceteris Paribus Assumption
All other things unchanged
Assumption that only one variable changes at a time
Economists do this because they want to get a general sense of the direction of relationships

43. Normative versus Positive Statements
Normative- a statement that makes a value judgment
Positive-a statement of fact or a hypothesis

44. Normative or Positive? You decide!
Ms. Hartsfield is shorter than most students at SMCHS.
Ms. Hartsfield has two of the cutest babies ever!
Ms. Hartsfield has two children.
Ebenezer is a cloth snowman.

45. Chapter 1 Appendix 1 What is a graph? What does it illustrate?
Origin of graph
Slope
Independent variable-variable that induces the change (usually x [horizontal] axis)
Dependent variable-variable that responds to the change (usually y [vertical] axis)

46. Chapter 1 Appendix 1 Positive slope/direct relationship
Negative slope/indirect relationship

47. Movement along versus movement of the curve
Along: change from one point on the curve to another that occurs when the dependent variable changes in response to the independent variable
Change in quantity supplied or demanded
Of: new values of variable at each value of the other variable
Change in supply or demand