Unit One Thinking Like an Economist

Fundamental Economic Concepts

Chapter One What is Economics? The Study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources.

Do you think the study of economics is worth your time and effort?

Go to page 3, examine the picture – How does this image symbolize the chapter titled What is Economics? Imagine you have $100 to spend – make a list of items that you would like to buy and the approximate price of each. Add up the total – did you go over a $100? If so you will need to remove something from your list Choice is the Key concept in Economics!

Scarcity and the Science of Economics Lesson 1 Go to page 6 and Complete the Scarcity activity.

What is the most fundamental economic problem facing all societies? SCARCITY The condition that results from society not having enough resources to produce all the things people would like to have.

Do you know the difference between a need and a want? Need – is a basic requirement for survival – food, clothing, shelter Want – is a way of expressing a need – example – for food a person may “want” pizza

Economic Products – goods and services that are useful, relatively scarce, and transferable to others. Good – an item that is economically useful or satisfies an economic want -Durable and Nondurable goods Project information

Make a Collage Regular Economics only !!!!!!! Divide your paper in half Label one side “Durable Goods” and the other side “Nondurable Goods.” Collect 6 pictures to use as example for each side Graded on : Following Directions: 5 points Durable Goods: 15 points Nondurable Goods: 15 points Neatness/Name/Title: 5 points Turned it on Time: 10 points Total: 50 points

Read the Article on pg 9 – Adam Smith Be prepared to discuss it.

Adam Smith pg. 9 Adam Smith is considered the _______________. Regular Economics only Adam Smith pg. 9 Adam Smith is considered the _______________. What is the name of his book and in what year was it written? Smith believed that political economics depends on a __________________. What did Smith mean by “Invisible Hand”?

Important Economic Terms Consumer Good – use by individuals Capital Goods – used to produce other goods Services – work that is performed Consumers – one who uses goods and services

Value – refers to a worth that can be expressed in dollars and cents Paradox of Value - what makes something valuable? Utility – the capacity to be useful and provide satisfaction Wealth – accumulation of products

What is TINSTAAFL? THERE IS NO SUCH THING AS A FREE LUNCH

Three Basic Questions What to produce? How to Produce? For Whom to Produce?

The Scope of Economics Description - Gross Domestic Product (GDP) Analysis Explanation Prediction

Copy and answer the following questions: What is the basic economic problem facing all societies? How is need different from want? What do the letters TINSTAAFL stand for, and what does the term mean to consumers? What are the three basic questions societies have to answer about the way their resources are used? What are the four key elements of the study of economics? Explain briefly why each one is important. What is scarcity in an economic sense? What is the difference between a consumer good and a capital good?

8.What kind of economic product is a service? 9.What is a consumer? 10.To what does value refer? 11. What is the paradox of value? 12.What is required for something to have value? 13.What is wealth?, List the four characteristics of the accumulated goods that make up economic wealth. 14. Define GDP

Our Economic Choices Sec. 2

Think of the economy as two broad groups: Producers and Consumers Complete activity on page 14

Factors of Production Land – natural resources Capital – tools, equipment, machinery and factories used in production (Capital Goods) (Financial Capital) Labor - workers Entrepreneurs – risk takers Equals – Production – the process of producing goods and services

Production Possibilities Curve Identifying Possible Alternatives Fully Employed Resources Opportunity Cost – the value of the next best alternative given up The Cost of Idle Resources Economic Growth

There are alternatives and costs to everything we do There are alternatives and costs to everything we do. In a world where “TINSTAAFL”, it pays to examine these concepts closely. TRADE –OFFS or alternative choice – figure 1.5 - discuss OPPORTUNITY COST – the cost of the next best alternative use of the money, time, or resources when one choice is made rather than another

Opportunity Cost:  Gerard has two choices for a summer job. The first is at a computer manufacturer, where he would earn $10.25 per hour. The second opportunity is with a landscaping company, where he could work and have lunch with three of his closest friends every day. The landscaping job would pay $8.65 per hour. For one 40-hour workweek, what would be the opportunity cost, in dollars, of accepting the landscaping job? What would be the opportunity cost of accepting the job with the computer manufacturer?

Consumer Rights The right to safety The right to be informed The right to choose The right to be heard The right to redress Consumerism - a social movement that aimed at promoting the interests of consumers

Consumer Responsibility Include important details and copies of receipt, guarantees, and contracts to support your case Report the problem immediately. Do not try to fix a product yourself, because doing so may cancel the warranty If you need to contact the manufacturer in writing, type the letter or send an e-mail. Keep a copy

Keep cool. The person who will help you solve your problem is probably not responsible for causing the problem Keep an accurate record of your efforts to get the problem solved. Include the names of people you have spoken to or written to and the dates on which you communicate Consumers are expected to do his or her research before purchasing a product Behave ethically when dealing with the producer or the merchant

Complete sec. 2 handout

Using Economic Models sec. 3 Because resources are scarce, consumers need to make wise choices.

Economic Growth When a nation’s total output of goods and services increase over time Economics growth requires risks and sacrifices. Economist can describe economic growth in a number of ways but the Production Possibility Curve is the easiest Everyone benefits when resources are used efficiently (Increased Productivity) Human Capital is one of the major contributions to growth Human Capital – the sum of the skills, abilities, health, and motivation of people pg. 23 discuss*

Economic Growth – occurs when a nation’s total output of goods and services increases over time The most important factor to Economic Growth is Productivity Productivity – measure of the amount of output produced by a given amount of inputs in a specific period of time Division of Labor – workers are arranged so that individual workers do fewer task Specialization – when a worker does one task and does it well Human Capital – the sum of the skills, abilities, health, and motivation of people

The Circular Flow of Economic Activity Factor Market – the market where productive resources are bought and sold Product Markets – market where producers sell their goods and services to consumers Draw the chart on page 25 and answer the questions under the chart - turn in for a grade

Economic Interdependence We rely on others, and others rely on us to provide the goods and services that we consume

Thinking Like an Economist Build Simple Models Employ Cost-Benefit Analysis –compare the cost of an action to the benefits received Take Small, Incremental Steps

The Road Ahead Understanding the FREE ENTERPRISE ECONOMY- one in which consumers and privately owned business, rather than the government, make the majority of the WHAT, HOW, & FOR WHOM decisions STANDARD OF LIVING – the quality of life based on the possession of necessities and luxuries that make life easier Economics for Citizenship Making the Rational Choice

Chapter 1, sec. 3, pg. 29 Answer questions 3 – 6

Chapter 1 & 2 test Jan. 13th What you need to have with you: Key Terms – all of the chapter Lesson 1 Questions 1 – 14 Lesson 2 handout – complete Lesson 3 Questions pg. 29, # 3 - 6