• You have an economics test on Monday. It is Friday Night. Your only chunk of free time all weekend is tonight from 6:00 to 11:00. Before deciding how you will spend this time, consider these factors: • You have $40 to spend. • You have an economics test on Monday. • This is the last basketball game of the season. • It is your mother’s birthday. • Someone you like has asked you out on a date. • Your favorite band is in town tonight. Fill in a table like the one below showing how you plan to spend your time. Create your own activities or choose from the list of possible activities. If you choose an activity from the list, use the given time and price. Basketball game: 3 hours, $5 Dinner: 2 hours, $20 Movie: 2 hours, $10 Rock concert: 4 hours, $40 Study for test: variable time, $0 Hang out at friend’s house: variable time, $0 Work at job: variable time, earn $10 per hour Family time: variable time, $0 TIME ACTIVITY PRICE 6:00 p.m. 7:00 p.m. 8:00 p.m. 9:00 p.m. 10:00 p.m.

1. What decisions did you have to make in this exercise. 2 1. What decisions did you have to make in this exercise? 2. What constraints did you face when making these decisions? 3. How does this illustrate that we live in a world of scarcity?

Homework for Next Class: Chose a topic from your life Create a comic strip that demonstrates your ability to think like an economist by accurately and creatively illustrating these basic economic principles in a story line. Each term should have its own box. evaluated for creativity, accuracy and effort scarcity wants resources choice opportunity costs rationing device optional: what might have been unintended consequences trade-offs constraints incentives

Titanic Chart Thinking in terms of: Example of this type of thinking: Costs & Benefits Trade-offs Opportunity Costs Unintended effects Global economy Micro/Macro

Economics Is Everywhere-Think Like An Economist… Economists view human actions using the concepts of: Scarcity Choice-cost/benefit analysis Opportunity costs Trade-offs Marginal choice What might have been Unintended consequences

Resources and Rationing Device A consequence of scarcity is that people must make choices and compete for resources. Resources (human, natural, capital) are needed to produce goods and services. A rationing device is a way of determining who gets what and how much. Price is a common rationing device. Ex. Titanic – How would you ration life boats in a life and death situation?

Chp 1: Sec 2 – Economic Way of Thinking Cost v. Benefit – a person will do whatever he is considering only if the benefits are greater than the costs Trade off – more of one thing means less of something else

Trade Offs A situation in which more of one thing means less of something else. Ex. If a country spends more on national defense than it will have less to spend on health care or education.

Thinking in terms of costs and benefits Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something: few choices are "all or nothing" decisions. marginal choices

A lesson in scarcity and rationing As you watch the clip from Titanic, write down examples of scarcity, rationing devices and opportunity costs. With your partner, discuss the following questions and record your thoughts: What are the scarce goods and how are they rationed among the passengers? As the Titanic begins to sink, how does “life or death” scarcity change the way goods are rationed among passengers? The cruise line chose not to have enough lifeboats for all the passengers. Using your knowledge of the movie, explain the opportunity cost of having the extra deck space. 10

More scarcity & rationing Explain the opportunity costs Rose pays in choosing Jack over Hockley. What would you say is the “price” Rose paid for her love of Jack? Titanic portrays many difficult choices that passengers made on that ill-fated night. Using your notes, discuss the opportunity costs of three of the passengers’ choices. Identify the rationing devices used in the following scenes from Titanic: The tickets Jack and his friend obtain to board the Titanic First class luxury seats Boarding lifeboats in the early stages of the disaster, when people are unaware of, or ignored, the coming dangers. Boarding lifeboats after the passengers were aware that the ship was sinking rapidly and there were too few lifeboats. 11