1. Explorations in Economics Alan B. Krueger & David A. Anderson

2. Chapter 1: Exploring Economics -Module 1: What Is Economics? -Module 2: Production Possibilities for Nation -Module 3: The World of Economics

3. WHY STUDY ECONOMICS? Make sense of the daily news Make good decisions about your time and money Lead a happier, more satisfying life SO… Economics provides a framework for understanding the world around you. Economics helps you evaluate messages from advertisers, the media, and people trying to take your money.

4. MODULE 1: What is Economics? KEY IDEA: Economics deals with the choices we make, individually and as a society, under conditions of scarcity. OBJECTIVES: To explain what economics is and why it is important. To define opportunity costs. To differentiate between wants and needs. To name society’s key economic resources.

5. SCARCITY AND YOU Scarcity Implies Tradeoffs Economics…the study of choice under conditions of scarcity. Scarcity…exists when we desire more of something than we can have. So… You make a tradeoff when you give up one thing to get something else. This means you make tradeoffs to overcome scarcity.

6. The opportunity cost of a choice is the value of the next- best alternative given up when that choice is made. Opportunity Cost

7. Needs and Wants Needs are minimal requirements of things such as food, water, and shelter that are necessary for survival. Wants are things that are desired but are not essential to life. An economy coordinates the production and distribution of goods and services. Scarcity and Society

8. Goods and Services Goods are physical items produced in an economy, such as jeans, tennis rackets, popcorn, cars, and homes. Think of some goods that you are currently carrying. Services are activities produced in an economy, such as education, entertainment, and health care. Scarcity and Society

9. Resources are the basic elements from which all goods and services are produced. Land is anything drawn from nature for use in the production of goods or services. Labor is the time and effort people contribute to the production process. Scarce Resources

10. Resources are the basic elements from which all goods and services are produced. Capital is anything long lasting that is created by humans for use in production. Entrepreneurship is the willingness of people to organize, operate, and assume the risks involved with business ventures. Scarce Resources

11. Figure 1.1: Resource Scarcity With limited resources and unlimited wants, society is forced to make tradeoffs. DID YOU GET IT? How does the scarcity of resources affect society’s ability to satisfy its wants? Scarce Resources

12. What is… A. Economics? B. Scarcity? C. Tradeoff? D. Opportunity cost? E. Society? F. Needs? G. Wants? H. Economy? I. Goods? MODULE 1 REVIEW J. Services? K. Resources? L. Land? M. Labor? N. Capital? O. Physical capital? P. Human capital? Q. Entrepreneurship? R. Inputs?

13. MODULE 2: Production Possibilities for a Nation KEY IDEA: A production possibilities frontier illustrates the tradeoffs society makes in its use of scarce resources. OBJECTIVES: To explain why economists use models. To present and interpret the production possibilities frontier model. To explain the law of increasing opportunity cost. To define the concepts of efficiency and growth.

14. Economists use modeling to simplify reality. Models help to focus on selected aspects of the real world by stripping away nonessential details. Economics Models

15. The Production Possibilities Frontier A production possibilities frontier, or PPF, is a curve that shows the maximum quantity of one good that can be produced for each possible quantity of another good produced.

16. Efficiency and Growth An economy is efficient if there is no opportunity to make someone better off without making anyone else worse off.

17. Opportunity Costs for Society

18. The law of increasing opportunity cost states that the opportunity cost of a good rises as more of the good is produced.

19. Economic growth is an increase in the ability to produce goods and services over time. Efficiency and Growth

20. What is… A. Model? B. Production possibilities frontier? C. Law of increasing opportunity cost? D. Efficient? E. Economic growth? F. Economic model? MODULE 2 REVIEW

21. MODULE 3: The World of Economics KEY IDEA: There are two types of economics that differ in regard to the topics economists study and the types of questions they ask. OBJECTIVES: To explain the difference between microeconomics and macroeconomics. To differentiate positive and normative economics. To identify terms that have special meanings in economics.

22. MicroeconomicsMacroeconomics The study of how people make decisions and how those decisions affect others In the economy. Microeconomics Example Topics: - Profits - Markets - Pollution The study of the economy as a whole. Macroeconomics Example Topics: - Inflation - Interest rates - Government spending

23. Wages and Economics A degree in economics can allow people to work in many places in both government and the private sector.

24. Positive Economics Normative Economics Positive economics is the study of what the world is like and why it works the way it does. It is about facts and cause- and- effect relationships. Positive questions include: How many teenagers live in poverty? Do people buy more or less Coke when their incomes increase? Normative economics is the study of the way things should be rather than the way things are. Normative economics brings opinions and ideals into the process of answering questions. Normative questions include: Should our country do more to help the poor? Should college athletes be paid to perform?

25. In economics, a market is not a place but a collection of buyers and sellers, wherever they may be. Markets coordinate prices through demand and supply. Markets help society understand the problem of scarcity. The Language of Economics

26. What is… A. Microeconomics? B. Macroeconomics? C. Positive economics? D. Normative economics? E. Market? F. Capital? MODULE 3 REVIEW