The 6 Core Economic Principles They are in your life every day! EQ#2: How do/have economics and money influenced the decision making of individuals, groups, business and governments in America?

#1: People Choose *Everything in your life is a matter of choice. -Can we really say we had “no choice?” What are some choices you have made already today? *Getting out of bed *Coming to school *Being disruptive *People choose to do things that are best for them. *All actions are the result of our choices. *People will try to economize their choices -Try to get the best combination of benefits and costs. -Get the biggest bang for your buck! Dorm life example: Use soap also as shampoo to save money.

#2: Opportunity Cost *Choices involve not only choosing something. But also refusing something else. *Opportunity cost is what you give up in favor of something else. -It is the second best choice not taken *Opportunity cost is never money! Dorm life example: If you had the choice between the Pink Pony pillowcase and the Batman pillowcase and bought the Batman one, what would be your opportunity cost? The Pink Pony Pillowcase

#3: People Respond to incentives in predictable ways. *People choose to do things for which they will be rewarded (the reward is the incentive). -Are allowances an effective incentive? *Incentives encourage people to act in a certain way. -Disincentives discourage people from acting (economic sanctions). *You can tell a lot about society and economics by the type of incentives people respond to. -What is the incentive for buying a hybrid car?

Examples of Incentives Sales Promotions Many choices And……….

What is the incentive behind each? Celebrity Endorsements What are these ads really selling? What does it say about what we value? Who would each ad appeal to? What is the incentive behind each?

#4: People Create Economic Systems *People create rules and/or systems that influence the way that they act. -There are two type of rules 1. Formal Rules Laws (Anti-Slander law) Contracts Tariffs Dorm life example: Requiring a credit card to shop online. The store having a money back guarantee.

#4: People Create Economic Systems cont…. 2. Informal Rules: People will not be fined or arrested as a result of breaking these. But, there are consequences. Good customer service Good return policy “The Customer is always right” Elvis Example: Consumers do not always require truthful headlines. Dorm life example: When you were looking for inexpensive item, you may have been willing to sacrifice quality.

Governments Create Economic Systems Capitalist- many choices, lots of opportunity, few gov’t rules Socialist- fewer choices, less opportunity, rules to help people out Communist- few if any choices, few opportunity (if any), tons of rules

#5: People gain when they trade voluntarily * Not the same as an even trade * People will only trade up -What you trade for must be worth more. * You can trade not using money. -$ to turn the water on (service). -Baseball cards * “Wealth” might not mean $ -Respect, good feeling

#6: Consequences lie in the Future *All choices involve risk -Online item might not look the same. -Bought microwave, not laptop. *People often live for the moment *No one knows what the future holds -Stock market Spend all your money on a car….

….and have nothing left for college.