1. Introduction to Economics
Welcome to AP Economics!

2. ECONOMICS

3. The World & Resources
People +

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

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

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

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

8. 3 Types of Economic Systems
MARKET
COMMAND
TRADITIONAL

9. 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

10. 2 Types of Costs:

11. Marginal Analysis Economic Decisions are made at the Margin
Marginal Benefit vs Marginal Cost
Value of next unit consumed or produced
Rational people make decisions where MB = MC MC
Price
Quantity MB

12. Marginal Benefit WorksheetMB MC
Total Earnings Total 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

13. Should I go to college? Opportunity Benefit Opportunity Cost
Trade-off Analysis
Should I go to college?
Opportunity Benefit
Opportunity Cost
Explicit Cost?
Implicit Cost?
Long Run?
Short Run?