1. The Study of Economics…
Intro to Economics
What is Economics?
Individual Choice, Scarcity, Opportunity Costs
The Study of Economics…
Macro vs. Micro, Normative vs. Positive, Economic Methodology and Pitfalls

2. What is Economics? Study of scarcity and choice..
Unlimited wants and limited resources
Why do individuals make choices?
Because resources are scarce
Resources: Anything that can be used to produce something else
Factors of Production: The four major economic resources that are combined to produce goods and services.
Land, Labor, Capital, Entrepreneurship
Social Science concerned with efficient use of scarce resources to achieve maximum satisfaction of economic wants

3. What is Economics?
Scarcity: A resource is scarce when there is not enough of it available to satisfy the various ways society wants to use it.
Oil and coal
Water, clean air
Individuals make choices, so does society…
Sometimes society’s choices are just the sum of individual choices
Sometimes society’s choices are decided by the government
Some decisions are best left to society as a whole…for example, people might feel it is better to have some land unproduced…create a local park…or a national park. No individual has the incentive to leave that land open…so the government does it.

4. Opportunity Cost THERE IS NO SUCH THING AS A FREE LUNCH
Opportunity Cost: The value of the next best alternative that you had to forego when you made a choice.
Every choice has an opp cost
If you spend $15 on a pizza, you forego the opportunity to spend that on a steak
If you spend Saturday afternoon at the park, you can’t spend it doing homework
If you attend one college, you can’t attend another

5. Opportunity Cost Case Study
You decide to attend a local liberal arts college (which costs $5,000) more in tuition) instead of a state university
Opportunity Cost - $5000 you could have spent on something else AND the ability to attend the state university (this is a tradeoff)
You decide to attend that local liberal arts college with a full scholarship instead of going directly to work
Is your college education FREE?
Opportunity Cost – any cost of tuition (in this case it is free) AND the foregone wages of the job you could have had (tradeoff)

6. Macro vs. Micro Economics
Microeconomics: the branch of economics concerned with how individuals make decisions and how these decisions interact
Macroeconomics: the branch of econ that is concerned with the bigger picture – the overall ups and downs of the economy – the aggregates.
Macro or Micro?
Should I go to college or get a job after high school?
What determines the overall level of prices in the economy as a whole?
What government policies should be adopted to promote employment and growth in the economy as a whole?
What government policies should be adopted to make it easier for low-income students to attend college?

7. Normative vs. Positive Economics
Positive economics: economic analysis that describes the way the economy actually works
Normative economics: economic analysis that makes prescriptions about how the economy should work
Normative or Positive?
How much revenue will the tolls yield next year?
How much would that revenue increase if the toll were raised from $1 to $1.50?
Should the toll be raised, bearing in mind that a toll increase would likely reduce traffic and air pollution near the road but impose some financial hardship on frequent commuters?

8. Economic Methodology
Scientific Method - but theories are developed less concretely because you cannot hold lab experiments. You study the economy itself as your lab.
Generalizations – economic theories, principles, and laws are generalizations relating to economic behavior or to the economy itself. No two individuals are the same. What is true for the whole isn’t necessarily true for an individual.
Ceteris Paribus – all other things equal – to consider certain issues, they assume all others stay the same
Rationality – assume people’s decisions are rational (people are motivated by incentive)

9. Pitfalls to Objective Thinking
Fallacy of Composition – The assumption that what is good for one is good for all is NOT correct
Individual farmer has a bumper crop
All farmers have a bumper crop
Post Hoc Fallacy
Post hoc, ergo propter hoc
After therefore because of
Difference between causation and correlation
The government decreases taxes and the economy improves…causation or correlation?

10. Zoo Activity
8 minutes
Choose the animals for your zoo and write them on the board

11. Zoo Debrief