1. Economics for Leaders
Lesson 1: Economic Growth & Scarcity

2. Let’s Learn Some ECON
Take some notes, but don’t try to write down everything I say
I will tell you when you should take notes
Lectures will be fast-paced with lots of information and interaction
Pay attention and get involved
As the week ends, it will all come together
You can have all of these slides at the end of the week

3. Shining Student Moments
I will always be on the lookout for shining student moments and will award small prizes in recognition of these moments
If you want to win (and learn) then you need to be alert, engaged and participate in a meaningful way
Let’s have some FUN!
Online post-test at the end of the week (80%)*

4. Joke Of The Day Joke of the Day
At the end of the day, always remember…

5. Joke of the Day
Joke Of The Day
You can tune a piano, but…

6. Joke of the Day
Joke Of The Day
You can’t TUNA FISH!

7. Joke of the Day
Joke Of The Day

8. Economics for Leaders
Lesson 1: Economic Growth & Scarcity

9. Hypotheses for the Week
Human prosperity and social cooperation develop spontaneously in societies that protect private property rights and encourage voluntary trade.
Developing an economic way of thinking empowers people to understand and explain the world in which we live.

10. Why are some countries rich and others poor?
Low, Middle, & High Income Nations
Economic reasoning tools developed this week will help us to answer this and other questions about world poverty
Why are some countries rich and others poor?

11. Low, Middle, & High Income Nations
Economic reasoning tools developed this week will help us to answer this and other questions about world poverty
Why should we care?

14. Why Should We Care? Picture is link to video
Why Should We Care?

15. Economic Reasoning Principle #5:
Understanding based on knowledge and evidence imparts value to opinions.
Opinions matter and are of equal value at the ballot box. But the value of an opinion is determined by the knowledge and evidence on which it is based.
Statements of opinion should initiate the quest for economic understanding, not end it.

16. Eating Candy
Eating Candy

17. The Rules of the Game Institutions & Norms
Rules of the game shape how decisions are made
Decisions determine outcomes
People respond to incentives in predictable ways
Institutions and incentives set the table for choices/outcomes
What are some institutions or norms in our society?

18. Scarcity
Something is scarce if society cannot have all it wants at no cost
By cost we mean OPPORTUNITY COST
Some things are more scarce than others
Relative scarcity is determined by what must be given up

19. Eating Candy
Eating Candy

20. Choices & Opportunity Cost
Because the world is characterized by scarcity, individuals and societies are forced to make choices
Scarce resources must be allocated among many competing uses
Wood that is used for tables and chairs cannot be used for crutches
Crutches are not made of wood anymore

21. Choices & Opportunity Cost
Trees harvested for lumber cannot be forest (ecosystems, CO2)
Land kept as forest cannot be used for agriculture
Land left as greenspace cannot be used to build a road, school, hospital or mall
Land left as greenspace cannot be used to build houses (for rich/ poor)
How many choices do you make on a typical day?

22. Eating Candy
Eating Candy

23. Choices & Opportunity Cost
Opportunity cost is not always about money
What did you give up to be here?
Time is important, time is money or leisure
Opportunity cost is the value of the next best alternative that is given up when a choice is made by an individual or society

24. Choices & Opportunity Cost
Because we are forced to make choices (scarcity), we are faced with tradeoffs and opportunity costs
The cost of any choice is what is given up
Choosing is REFUSING!

25. Choosing Between Alternatives

26. Eating Candy
Eating Candy

27. Do You Want to Trade?

28. Do You Want to Trade?

29. Do You Want to Trade?

30. Economic Reasoning Principle #1: People choose, and individual choices are the source of social outcomes.
Scarcity necessitates choices: not all of our desires can be satisfied. People make choices based on their perceptions of the expected costs and benefits of the alternatives.

31. Eating Candy
Eating Candy

32. Economic Reasoning Principle # 2: Choices impose costs
Economic Reasoning Principle # 2: Choices impose costs. People receive benefits as they make decisions, but they also incur costs.
The cost of a choice is the value of the next best alternative foregone, measurable in time, money or some alternative value.
What did you give up to be here?

33. choices → TRADE-OFFS → forgone alternatives
OPPORTUNITY COST!
choosing is REFUSING!
the cost of something is what you give up

34. Eating Candy
Eating Candy

35. Economic Reasoning Principle # 3: People respond to incentives in predictable ways.
Choices are influenced by incentives, the rewards that encourage and the punishments that discourage actions. When incentives are altered, behavior changes in predictable ways.
People do what makes them better off
Marginal Benefit > Marginal Cost (MB > MC)

36. Choosing Between Alternatives

37. Eating Candy
Eating Candy

38. Do You Want to Trade?

39. Do You Want to Trade?

40. Eating Candy
Eating Candy

41. Do You Want to Trade?

42. Eating Candy
Eating Candy

43. A Fact Regarding Benefits
The benefit (value) of the next one will eventually be lower
Diminishing marginal benefit (value)
Value is based on benefit received
Rolos
Washing machine, automobile, house

44. Wheat or Oranges?
Wheat or
Oranges?

45. Wheat or Oranges?
Wheat or
Oranges?

46. Wheat or Oranges?
Wheat or
Oranges?

47. Which is more realistic?
Production Possibilities Frontier (PPF): Graphical representation of the possible goods/services an economy can produce at a given time with the available resources and technology

48. Wheat or Oranges?

49. A Fact Regarding Costs
The cost of the next one will eventually be higher
Rising marginal cost
Cost is based on what is given up
Wheat vs. Oranges, work, vacations, China and India rapid economic growth

50. Choose Between Alternatives
Do it if……
MB > MC

51. Big Ideas choices → TRADE-OFFS → forgone alternatives
OPPORTUNITY COST!
choosing is REFUSING!
the cost of something is what you give up

52. Big Ideas People do things that make them better off
Diminishing marginal value (benefit)
Rising marginal cost (opportunity cost)
The rules of the game (institutions/incentives) shape how decisions are made
Decisions determine outcomes
Different people have different preferences so people’s assessment of benefits/costs differ as a result

53. People’s Choices are always RATIONAL
Rational choice = choosing the alternative that has the greatest excess of benefits over costs
If ALL choices are rational, then the challenge is to understand individual decision-maker’s perceptions of costs and benefits

54. Choose Between Alternatives
Choosing
Between
Alternatives

55. There is no such thing as a free lunch
Quote From Thomas Sowell
"What is YOUR solution?“
"There are no solutions," I said. "There are only trade-offs and OPPORTUNITY COSTS.“
Opportunity Cost is the value of the next best alternative forgone (second best)
There is no such thing as a free lunch

57. There are only trade-offs and OPPORTUNITY COSTS
Policy Conundrum
There are no solutions.
There are only trade-offs and OPPORTUNITY COSTS