1. Unit 1—Introductory Materials
Krugman Sections 1 and 2
Modules 1-3
2 weeks

2. Economics is the study of _______.
What is Economics?
Economics is the science of scarcity.
Scarcity unlimited wants but limited resources.
Since we are unable to have everything we desire, we must make choices on how we will use our resources.
Economics is the study of _______.
choices
In economics we will study the choices of individuals, firms, and governments.

3. (Study of how individuals and societies deal with ________)
Examples:
You must choose between buying jeans or buying shoes.
Businesses must choose how many people to hire
Governments must choose how much to spend on education.
Textbook Definition
Economics- Social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants.
(Study of how individuals and societies deal with ________)
scarcity

4. Resources are Scarce

5. Trade Offs & Opportunity Cost
Due to scarcity, there are always trade-offs when decisions are made = choices
The cost of any good, service or activity is the value of what must be given up to obtain it = opportunity cost

6. Micro vs. Macro MICROeconomics- MACROeconomics-
Study of small economic units such as individuals, firms, and industries (ex: supply and demand in specific markets, production costs, labor markets, etc.)
MACROeconomics-
Study of the large economy as a whole or economic aggregates (ex: economic growth, government spending, inflation, unemployment, international trade etc.)

7. Positive & Normative Economics
Positive = FACTS describes the economy as it actually is, avoiding value judgments and attempting to establish scientific statements and economic behavior
Normative = OPINION involves value judgments about what the economy should be like
--loaded terminology
--biases—preconceptions that are not based on facts

8. Micro or Macro? The unemployment rate in the US was 4% in 2002.
Kraft Inc. laid off 3,000 workers last month.
The Consumer Price Index rose by 5%.
Aggregate demand was larger than aggregate supply creating a shortage.
The Dow Jones Industrial Average dropped 10 points today.

9. Positive or Normative? It was too cold in Duez’s classroom today.
The temperature is currently 98 degrees.
The fat cats at Exxon are making all kinds of money while gas prices go up.
The CEO of Exxon received a 25 million dollar bonus.
Higher interest rates reduce the amount of money borrowed.
I will not borrow money at 10% interest—that is just too high for me.

10. 5 Key Economic Assumptions
Society has unlimited wants and limited resources (scarcity).
Due to scarcity, choices must be made. Every choice has a cost (trade-offs & opportunity costs).
Everyone’s goal is to make choices that maximize their satisfaction. Everyone acts in their own “self-interest.”
Everyone makes decisions by comparing the marginal costs and marginal benefits of every choice.
Real-life situations can be explained and analyzed through graphs. 10

11. 11
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12. 12
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14. Review with your neighbor…
Define scarcity
Define Economics
Identify the relationship between scarcity and choices
Explain how Macroeconomics is different than Micro
Explain the difference between positive and normative economics
Identify the 5 main assumptions of Economics
Name 10 Disney movies

15. Analyzing Choices

16. Economics of College
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17. 2008 Audit Exam

18. Economic Methodology Scientific method Theoretical economics
Terminology
Generalizations
Ceteris paribus
--“other things equal” (one thing at a time)
Graphs

19. Economic Terminology Utility = Satisfaction! Marginal = Additional!
Allocate =
Distribute!

20. Efficiency Full production implies two types of efficiency
ALLOCATIVE efficiency means that resources are used for producing the combination of goods and services most wanted by society what society wants
PRODUCTIVE efficiency means that least costly production techniques are used to produce wanted goods and services producing with little waste

21. What’s the price? vs. How much does that cost?
Price vs. Cost
What’s the price? vs. How much does that cost?
Price = Amount buyer (or consumer) pays
Cost = Amount seller pays to produce a good
Investment
Investment = the money spent by BUSINESSES to improve their production
Ex: $1 Million new factory

22. **4 Factors of Production
1. land
Must be
natural &
limited

23. 2. Capital
Must be used
for production

24. 3. labor
The work
force (human
capital)

25. 4. Entrepreneurs
Risk takers in
search of a
new business

26. Phil Knight
Nike
Mark Cuban
Broadcast.com
Pierre Omidyar
Ebay
Chris DeWolfe & Tom Anderson
My Space
Mark Zuckerburg
Facebook
Warren Buffett--Berkshire Hathaway
Sean Combs
Bad Boy Records

27. Program for International Student Assessment (PISA) is a worldwide evaluation of 15-year-old school children's scholastic performance
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