Standard SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.

Economic Way of Thinking Economics explains how people interact within markets to get what they want or accomplish certain goals. Economics is a driving force of human interaction. Studying it reveals why people /governments behave in particular ways.

Key Concepts Opportunity Cost Economists main concern = opportunity cost = the best alternative we give up when we make a decision or choice. Economic decisions are more or less—not yes or no—choices.

Key Concepts People choose for good reasons People will choose alternative that benefits them the most. Weigh costs and benefits Voluntary Exchange (trade): When a person agrees to participate in a transaction (trade) because it makes them better off.

Key Concepts Incentives Matter Drives Choices When incentives change, people’s behavior changes in predictable ways. “Free gift with purchase” Earn a 100 as a grade for being on-time

Key Concepts Economic Systems Economic systems = created to influence choices and incentives Society is governed by written and unwritten rules that are the core of an economic system Price Trade/Barter Behavior Social interaction Laws

Key Concepts People Gain from Voluntary Trade People trade when they believe the trade makes them better off People gain from voluntary trade. Trade creates wealth. When two people trade voluntarily, they give up something they value less for something else they value more. Rational Decision Making When marginal benefits equal or outweigh marginal costs

Key Concepts Everything has a cost There is no such thing as a free lunch Every action has a cost

Key Concepts Economics is marginal thinking Marginal (meaning additional) choices = the effects of additions and subtractions from current conditions.

Key Concepts Unintended Consequences Economic actions create secondary effects. Sometimes these effects are not always good. One action can create many unintended consequences.

Key Concepts Value of Goods/Services are affected by choices Goods and Services do not have intrinsic value value is determined by preferences of buyers and sellers

What do we exchange? Services: A work performed for someone by someone else Goods: an item that satisfies an economic want

Who Exchanges Good and Services? Consumer: A person who buys or uses goods to satisfy an need or want (aka., buyer) Producer: Someone who makes a product for others (aka., seller)

SCARCITY? Not being able to have all the goods and services you want Because resources are limited, people must choose some things and give up others Or