Introduction to Economics Welcome to AP Economics! 1) Take a Book (front of classroom on floor) 2) Pick your Desk for this entire semester!

ECONOMICS

The World & ResourcesPeople +

Why do we need Economics? 1)Resources are SCARCE 2)People have Unlimited Wants & Needs FORCES: 3) Society to allocate resources

Formal Definition of Economics The social science of how society allocates scarce resources among unlimited wants and needs. End of Day 1

Economics is the social science of how a society allocates their scarce resources among unlimited wants and needs. Air versus Oil

Economic Systems All economic systems allocate scarce resources Society must choose both a political & economic system

3 Types of Economic Systems MARKET COMMAND TRADITIONAL

There is NO Free Lunch Nothing is free in economics People face Trade-offs in all decision making Decisions have both: -Opportunity Costs & Opportunity Benefits -Short Run and Long Run implications

2 Types of Costs:

Marginal Analysis Economic Decisions are made at the Margin –margin = next unit You decide to study => how long? You buy popcorn at a movie=> what size? Marginal Benefit (MB) vs. Marginal Cost (MC) Value of next unit consumed Cost of next unit When the MB ≥ MC then “do it”

Marginal Benefit Worksheet Total EarningsTotal Cost High School $800,000$0 Associate $1,200,000$25,000 Bachelor’s $2,000,000$100,000 Master’s $2,100,000$200,000 Doctorate $2,500,000$2,500,000 MBMC

Should I go to college? Opportunity Benefit Opportunity Cost Worksheet #1 Trade-off Analysis Explicit Cost? Implicit Cost? Long Run? Short Run?

Should the Gov’t Subsidize Electric Cars? BenefitsCosts

End of 2 nd Day Please read your textbook!