AGENDA Turn in your homework (signed syllabus and getting to know you sheet) Last day to do this for full credit! Today: intro to economics – scarcity, needs, wants, costs Homework: none

INTRO TO ECONOMICS

Who wants candy? Who wants one of these? “Is there enough for everyone?” No – scarcity “how should we allocate?”

Who wants candy? How did we divide up the candy (aka, how did we allocate)? Why did we allocate it that way? If I offer to give you something for nothing, is there a cost? Was the candy bar free?

The Basic Rule of Economics

THERE IS NO SUCH THING AS A FREE LUNCH Or, TINSTAAFL

TINSTAAFL What does that mean?

QUICK DISCUSSION Give an example of a supposedly “free” item that you see every day. Explain why the item is not really free by stating who or what actually pays for it.

ECONOMICS The study of how groups or nations allocate their limited (scarce) resources in which to satisfy their unlimited wants and needs.

Economics is The study of how groups or nations allocate their limited (scarce) resources in which to satisfy their unlimited wants and needs. In other words: we have unlimited wants and needs. There aren’t enough resources to meet those. Economics deals with that problem.

Economics is The study of how groups or nations allocate their limited (scarce) resources in which to satisfy their unlimited wants and needs. Allocate: the need to make decisions Limited resources: land, labor, capital, entrepreneurship Unlimited wants and needs: goods and services

Basically… People have wants and needs. I want a mansion in the mountains. 2. There aren’t enough resources available to satisfy everyone’s wants and needs. I do not have the money to buy a mansion in the mountains. 3. Economics is the study of how groups of people collectively deal with that. But, again, economics is not about how a single person acts: it’s about how groups of people act collectively

The fundamental economics problem: scarcity Scarcity: the basic relationship between relatively unlimited wants and limited resources Unlimited wants + limited resources In the zoo game: what was your limited resource? What about in the warm-up?  Leads to decision making situations at both personal and societal levels. There aren’t unlimited resources. Resources are scarce. We can’t have everything we want – which leads to (hopefully) smart decision-making. Now, because we can’t have everything we want, we need to be able to make decisions about what we want..

Wants v. Needs What’s the difference?

Want vs. Need

QUICK DISCUSSION Because of scarcity (because resources are limited), everything that we do has a cost… Think back to building a zoo.. You made decisions because the land was scarce. What were your costs? What’s the difference between cost and price? Or, going on a run vs. lesson planning Or, ordering pizza vs. cooking at home

Dream scenario You were just given $200. How would you spend it? Be specific. Make a list of things you would want to purchase with that $200.

Trade-offs Trade-offs are alternative choices.

Opportunity Costs The most highly valued opportunity or alternative that is forfeited when a choice is made Aka, The second-best option Example: Buying a front-row concert ticket vs. a fancy new pair of shades What did you consider when you were thinking about spending that $200? Or, going on a run vs. lesson planning Or, ordering pizza vs. cooking at home

Difference between Opportunity Costs and Trade-offs? Trade-offs are ALL OPTIONS in a decision. The opportunity cost is the NEXT BEST OPTION. What are you giving up to get what you want?

Economics: The Study of Choices Scarcity Trade Offs Opportunity Cost

Trade Offs Choices 1. 2. 3. 1. 4. 2. 5. Your Choice (Benefit) Top two choices 1. 2. Opportunity Cost

Let’s do another What might you do after school today? OR – IF THERE’S A LOT OF TIME – START THAT WORKSHEET. OR WAIT FOR THAT FOR TOMORROW.

Can you bring it all together? Exit ticket. Individually on a half sheet of paper, answer the following question: what is the fundamental problem of economics, and how do people react to that?

To sum it up… You can’t have everything you want in this world, because you don’t have enough resources to satisfy your wants. This is called scarcity. Because of this, every decision you make has a cost. You are always forsaking something when you make a decision. The apartment that I live in. It’s downtown. Why did I choose that? What’s the cost of me being married?

BASIC ECONOMIC TRUTHS

1. PEOPLE CHOOSE Resources are limited Needs and wants are unlimited Everything you do is a choice Skipping class

1. PEOPLE CHOOSE It’s 11pm. You have a paper due tomorrow in your 7th period English class that you haven’t started. You also have 50 math problems for homework and a science lab. You don’t like your 1st or 2nd period teachers. What is the resource? What are the needs and wants? What are possible choices? Skipping class

2. PEOPLE’S CHOICES INVOLVE COSTS Cost and price are not the same What’s the difference? Hold up three different candy bars “raise your hand if you want one of these” “are there enough to satisfy everyone’s wants?” no – that’s scarcity How should I allocate these three candy bars? Based on that, choose a winner. “did you receive this candy bar for free?” no. why not? I paid for it. Also, the cost of choosing this candy bar is giving up the other two candy bars. Ask kids what is x’s names personal cost? Same with no 2 – the opportunity cost s the other candy bar. And three – they have no option; they’re giving it up – but I still paid for it.

2. PEOPLE’S CHOICES INVOLVE COSTS Cost and price are not the same What’s the difference? Cost is not always monetary. It can be services, time, money, what you’re giving up to do something, etc Price is monetary. The price of a nice pair of jeans is $100. Hold up three different candy bars “raise your hand if you want one of these” “are there enough to satisfy everyone’s wants?” no – that’s scarcity How should I allocate these three candy bars? Based on that, choose a winner. “did you receive this candy bar for free?” no. why not? I paid for it. Also, the cost of choosing this candy bar is giving up the other two candy bars. Ask kids what is x’s names personal cost? Same with no 2 – the opportunity cost s the other candy bar. And three – they have no option; they’re giving it up – but I still paid for it.

It’s 11pm. You have a paper due tomorrow in your 7th period English class that you haven’t started. You also have 50 math problems for homework and a science lab. You don’t like your 1st or 2nd period teachers. What’s the cost, if: You pull an all-nighter and get all of your work done. You skip 1st and 2nd period. You skip your math homework. You don’t finish your English paper because you think English is irrelevant. Skipping class

2. PEOPLE’S CHOICES INVOLVE COSTS Opportunity cost The next best alternative What are you giving up? What is the cost of you giving that up? What’s the opportunity cost of being in class today? Hold up three different candy bars “raise your hand if you want one of these” “are there enough to satisfy everyone’s wants?” no – that’s scarcity How should I allocate these three candy bars? Based on that, choose a winner. “did you receive this candy bar for free?” no. why not? I paid for it. Also, the cost of choosing this candy bar is giving up the other two candy bars. Ask kids what is x’s names personal cost? Same with no 2 – the opportunity cost s the other candy bar. And three – they have no option; they’re giving it up – but I still paid for it.

3. PEOPLE RESPOND TO INCENTIVES IN PREDICTABLE WAYS Money Why is it useful? Hold up three different candy bars “raise your hand if you want one of these” “are there enough to satisfy everyone’s wants?” no – that’s scarcity How should I allocate these three candy bars? Based on that, choose a winner. “did you receive this candy bar for free?” no. why not? I paid for it. Also, the cost of choosing this candy bar is giving up the other two candy bars. Ask kids what is x’s names personal cost? Same with no 2 – the opportunity cost s the other candy bar. And three – they have no option; they’re giving it up – but I still paid for it.

4. PEOPLE CREATE ECONOMIC SYSTEMS THAT INFLUENCE CHOICE AND INCENTIVE Rules, laws, and prohibitions Child labor laws Taxes Rewards Hold up three different candy bars “raise your hand if you want one of these” “are there enough to satisfy everyone’s wants?” no – that’s scarcity How should I allocate these three candy bars? Based on that, choose a winner. “did you receive this candy bar for free?” no. why not? I paid for it. Also, the cost of choosing this candy bar is giving up the other two candy bars. Ask kids what is x’s names personal cost? Same with no 2 – the opportunity cost s the other candy bar. And three – they have no option; they’re giving it up – but I still paid for it.

5. PEOPLE GAIN WHEN THEY TRADE VOLUNTARILY Voluntary trade is win-win It increases wealth! You drive me to the airport, and you can use my car while I’m gone People who want to trade create a market On the flip side… Involuntary trade decreases wealth Thievery, slavery I looooove to cook. Lets say that all of the resources I own are 50 cookbooks. What does a student like to do? Let’s say they only on 50 soccer balls. Those, individually, are useless to both of us. Let’s trade 25 for 25. We now have more resources. We have both increased our wealth. Another student – and we keep sharing and trading. *ex – petsitting Winnie over the break; me watering her plants while she’s gone for two weeks.

6. PEOPLE’S CHOICES HAVE CONSEQUENCES FOR THE FUTURE Ex: Going to college versus not going to college Marrying someone versus being a bachelorette forever Saving versus spending