Spring Semester 2015 - MCS Economics

What is Economics All About? SCARCITY! Economics is the study of how people, individually and in groups, choose to use their limited resources to satisfy their unlimited wants. All resources are scarce because they exist in finite amounts. All resources have alternative uses. What are some scarce resources that you have to manage every day?

What is Economics All About? Economics is the science of decision making, or of how people make choices. positive economics – describes how things are normative economics – describes how things ought to be

What is Economics All About? Economics has a lot to do with asking questions about – and then solving or explaining – everyday mysteries and enigmas. enigma: a puzzle that seems to defy common sense More on this aspect later!

Thinking Like an Economist INSTRUCTIONS: On your handout, you should see a table with columns that have the following headings: For each principle (7 total), sketch a visual symbol to help you remember them. Principle Symbol One sentence summary.

Thinking Like an Economist PRINCIPLE 1: Scarcity forces tradeoffs Principle Symbol One sentence summary. Scarcity forces tradeoffs Limited resources force people to make choices and face tradeoffs when they choose.

Thinking Like an Economist PRINCIPLE 2: Cost versus benefits Principle Symbol One sentence summary. Cost versus benefits People choose something when the benefits of doing so are greater than the costs.

Thinking Like an Economist PRINCIPLE 3: Thinking at the margin Principle Symbol One sentence summary. Thinking at the margin Most decisions involve choices about a little more or a little less of something.

Thinking Like an Economist PRINCIPLE 4: Incentives matter Principle Symbol One sentence summary. Incentives matter People respond to incentives in generally predictable ways.

Thinking Like an Economist PRINCIPLE 5: Trade makes people better off Principle Symbol One sentence summary. Trade makes people better off By focusing on what we do well and then trading with others, we will end up with more and better choices than by doing everything for ourselves.

Thinking Like an Economist PRINCIPLE 6: Markets coordinate trade Principle Symbol One sentence summary. Markets coordinate trade Markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers.

Thinking Like an Economist PRINCIPLE 7: Future consequences count Principle Symbol One sentence summary. Future consequences count Decisions made today have future (and often unintended) consequences.

Economics: Preview Instructions: On the back of your handout, answer the following questions. We will start off with this tomorrow, so you will want to jot it down to remember it.

Economics: Preview Question 1: If you could choose between two nearly identical products—one that is free and one that you have to pay for—which would you choose? Why?

Economics: Preview Question 2: If you were opening a new business, would you select a location closer to or farther away from a business that sold a similar or even identical product? Why?

Economics: Preview Question 3: If you could make a small change in your daily routine that would save you time and money, would you make the change? Why or why not?