Introduction to AP Economics Welcome!

ECONOMICS

The World & Resources People +

Why do we need Economics? Resources are SCARCE People have Unlimited Wants & Needs FORCES: 3) Society to allocate resources

Exact Sciences Social Science versus Social Science Fact based Proofs often used: 2 + 2 = 4 Theory based Difficult to prove Based on human behavior Examples: Psychology Economics History Examples: Physics Chemistry Mathematics Social sciences are academic disciplines which study the social life of human groups & individuals Examples: anthropology, economics, geography, history, political science, psychology & sociology

Formal Definition of Economics The social science of how society allocates scarce resources among unlimited wants and needs.

Economic Systems All economic systems allocate scarce resources Society must choose both a political & economic system

3 Types of Economic Systems MARKET COMMAND TRADITIONAL

What is a Millennial? Generation Y born between 1982-1997 Oldest about 35 years old

End of Day 1

Economics is the social science of how a society allocates their scarce resources among unlimited wants and needs. Air versus Oil

There is NO Free Lunch Nothing is free in economics People face Trade-offs in all decision making Decisions have both: -Opportunity Costs & Opportunity Benefits -Short Run and Long Run implications

2 Types of Costs:

Marginal Analysis Decisions are rarely “all or nothing” Most decisions are made at the Margin margin = next unit (consumed or produced) You first decide to study. => Marginal decision = how long to study? You buy popcorn at a movie => Marginal decision = what size to buy? Marginal Benefit (MB) vs. Marginal Cost (MC) Value of next unit consumed Cost of next unit produced In economics, when the MB ≥ MC then “do it”

Marginal Benefit Worksheet MB MC Total Earnings Total Cost High School $800,000 $0 Associate $1,200,000 $25,000 Bachelor’s $2,000,000 $100,000 Master’s $2,100,000 $200,000 Doctorate $2,500,000 $2,500,000

Should I go to college? Opportunity Benefit Opportunity Cost Worksheet #1 Trade-off Analysis Should I go to college? Opportunity Benefit Opportunity Cost Explicit Cost? Implicit Cost? Long Run? Short Run?

Should the Gov’t Subsidize Electric Cars? Benefits Costs

End of 2nd Day Please read your textbook!