8/21/14 Warm-up: Set aside 1 page in your notebook for Unit 2 (Microeconomics) Terms and Objectives. Set aside 3 pages for Unit 2 Warm-ups. Update your table of contents. SWBAT: Illustrate the circular flow model; explain how firms and individuals are connected to one another using the circular flow model.

R EVISIONS TO E CONOMIC P RINCIPLES IN THE N EWS Study rubric and comments Revise some or all of the assignment Attach revisions to the original (with original rubric) Submit by Friday August 29

E VERYDAY E NIGMAS Read over each enigma and record your best explanation in the column marked “Your Initial Explanation”

E VERYDAY E NIGMAS At your group – share your initial explanations. Select one explanation for one of the enigmas that you are most confident about. Be prepared to share.

W HY DOES A LIGHT COME ON WHEN YOU OPEN THE REFRIGERATOR, BUT NOT WHEN YOU OPEN THE FREEZER ? Light is a fixed cost Doesn’t vary with the number of times the door is opened Benefit = ease of finding things Refrigerator opened a lot more than freezer – much larger benefit High end models do have lights in the freezer

W HY IS MILK SOLD IN RECTANGULAR CONTAINERS WHILE SOFT DRINKS ARE SOLD IN CYLINDRICAL CONTAINERS ? Rectangular containers use shelf space more efficiently Milk must be refrigerated MC of space on a refrigerated shelf much higher! Also, soda is usually consumed straight from the container – round bottles fit into hands better – MB of a round container is higher

Wasted Space

W HY DO FEMALE MODELS EARN SO MUCH MORE THAN MALE MODELS ? Models benefit retailers by convincing customers to buy products American women spend more than twice as much as men on fashion MB of a better looking female model much higher than a better looking male model

W HY ARE HOTEL MINIBAR PRICES SO EXPENSIVE ? Hotels don’t sell many snacks/drinks – must charge a higher price to cover costs Price discrimination – allows hotel to earn more from customers less sensitive to price (those with a more inelastic demand) Helps make up for slim profit margins on rooms

W HY DO RETAILERS PUT C HRISTMAS DECORATIONS ON DISPLAY SO EARLY ? Consumers don’t spend more if displays are out early Firms hope to capture sales from competitors But won’t likely creep earlier as there is an opportunity cost – shelf space can’t be used for non-holiday merchandise

C IRCULAR F LOW

Factor/Resour ce Market Product Market $ $ $ $ Firms Households A A B B C C D D