Section 1 Basic/Fundamental Economic Concepts Modules 1-4 Nancy K. Ware Gainesville High School AP Macroeconomics

MODULE 1 The Study of Economics

Module 1: The Study of Economics What is Economics? Study of Scarcity & Choice ~Individual Choice is the CORE of Economics With a partner: make a list of your basic everyday needs and your wants. Choose which ones you want fulfilled everyday. What supplies these things? Why can’t you have everything you want and need? Scarcity!!!

What is the Economy Anyway? System of coordinating a society’s productive and consumptive activities…in other words…a market Are there different types of markets? Would you go to a car dealership and buy mangos? Market Economy: production and consumption are decided mainly by the producer and consumer, not the gov’t (NOT THE GOV’T) Command Economy: (on the other end of the economic spectrum) a central authority makes the economic decisions in the economy Examples of Market? - Examples of Command USA!!! ~ China Great Britain ~ Russia Japan ~ Venezuela

Issues with Command Economies Lack of INCENTIVES. Ok what’s an incentive? Video Clip  What motivates you??? Property rights establish ownership & give people the right to trade their property or goods for a profit This is the INCENTIVE Commands economies lack Marginal: how much more OR less are you going to do? Marginal Benefit vs. Marginal cost plays a key role in all economies

Renewable versus Non-renewable EF1b: Define and give examples of productive resources (e.g. land (natural), labor (human), capital (capital goods), and entrepreneurship (human intellect & money) Resource: What is it? Land Labor Capital Entrepreneurship Renewable versus Non-renewable

EF1c: List a variety of strategies for allocating scarce resources Strategy Oil Water Gasoline Trees Meat (chicken, beef, fish)

EF1c: List a variety of strategies for allocating scarce resources Strategy Oil High prices Water Watering bans, odd-even days Gasoline rationing Trees Conservation areas Meat (chicken, beef, fish) Rationing (WWII)

Macro vs. Micro What’s the difference? Microeconomics: What is it? How individuals make decisions and interact…in other words the smaller parts that make up the whole Macroeconomics: What is it? The big picture or the overall ups and downs of the economy as a whole

Positive vs. Normative Economics How the economy actually works; describing the economy Normative: How the economy should work; prescription not description; more than one answer depending on who you ask

HW: Module 1 Review Questions p.8 Activity: Build A Zoo! Section 1 Build A Zoo! Module 1 An activity to reinforce scarcity, cost vs. benefit, marginal analysis, opportunity cost Group ~ Names ______________________________________________________________________Date____________________ Break into groups of 4 You have 20 acres to use & each exhibit takes up a certain number of acres. Select your exhibits and be prepared to explain why you chose what you did. Use the back if necessary. Why did you not choose every type of exhibit? (scarcity) Why did you choose one exhibit over the other? (cost v. benefit) What was the last exhibit to make the cut? (marginal analysis) Elephants 3 acres Howler monkeys .5 acre Lions 1 acre Grizzly bears 1.5 acres Polar Bears 1.5 acres Reptile house 1 acre Tigers 1 acre Orangutans 1 acre Giraffes 2 acre Hippos .5 acre Ostriches .5 acre Playground .25 acre Zebras 1 acre Gorillas 2 acres Llamas 1 acre White rhinos 1 acre Kangaroo .5 acre Lake with waterfowl and flamingos 3 acres Petting zoo .5 acre Picnic area 1 acre Gift shop .25 acre Wolves 2 acres Jaguar .5 acre Restaurant .5 acre Insect exhibit .25 acre Climbing wall .5 acre HW: Module 1 Review Questions p.8