1. Fundamentals
Mr. Warner
Economics

2. What you will learn in this Module:
Core economic concepts
(Vocabulary heavy)

3. Core concept Identify and Discuss Economics is the study of choice.
Why do we need to make choices?
Scarcity
(something is both limited and desired)
Factory
Workers
Oxygen
Love
Diamonds
Clouds
HIV
Apartments in the 101 Building
Clean
Water
Teachers
Seats on an Airplane
Green Paint
Points for your House
Time
War
Creativity
Mosquitos
Doctors
Hugs
Homework Points
GDP is really a P*Q measure. You take the quantity of output (Q) and multiply by the price of the output (P). If prices rise, and Q stays the same, GDP will increase. This is misleading because the true size of the economy hasn’t increased, it has just gotten more expensive.
To adjust for changing prices, we create Real GDP, which calculates the value of current production, but using prices from a fixed point in time.
This fixed point in time is called the base year.
Valuing 2009 production at 2008 prices creates real GDP in 2009 and allows us to compare it back to 2008 (the base year).
This is also known as constant-dollar GDP.
Note: The instructor can now show the real GDP numbers for the same years from the table of nominal GDP numbers. Explain which year is the base year. Then show how the real size of the economy has changed from the 1980s to recent years.

4. What are we going to make?
Economic Questions
What are we going to make?
How much will we make?
Who will receive some? 1
Suppose an economy consists of only two commodities. The table above shows prices and output levels for two recent years.
Note: The instructor might want to select two goods/services that are relevant to the local community or state.
Nominal GDP in each year multiplies current prices by current levels of output.
In this simple economy, nominal GDP has risen by $6100.
In % terms: (20,100 – 14,000)/14,000 = .436 or 43.6%
WOW! The politicians will really be proud of themselves!!!
But was this increase due to a fundamental increase in output, or was it due to higher prices?
Let’s hold prices constant at 2007 levels and compute the value of real GDP.
By choosing to use 2007 prices, we have made 2007 our base year.
Notice that nominal GDP = real GDP in the base year of 2007.
Now we compute real GDP in 2008 by using output in 2008, but at prices from 2007.
Real GDP 2008 = $15,000, so in real terms the value of the economic output has only risen by $1000
In % terms: (15,000 – 14,000)/14,000 = .071 or 7.1%
Note: The instructor could add a third year where real GDP actually falls and introduce the class to what it means when the data indicates a recession.

5. Games like Fortnight/Battle Royale
Types of statements
Positive vs. Normative
This classroom
Family Mart
Japanese food
Your neighborhood
Games like Fortnight/Battle Royale
Korean music
Learning English
Exercise
The color green
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

6. Solutions
Quick Poll:
When you want to solve a difficult problem, would you rather –
Try to assemble a small group of intelligent people ?
Let people try to handle it by themselves?
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

7. What would you need…? Factors of Production
Some texts may not identify entrepreneurship as a Factor of Production, but in our class we will.
This will become clearer as our understanding of the national economy grows.
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

8. More on choice… UTILITY TRADE OFF 1pm – Sunday
Lunchtime. You look in your wallet and see $200, and you can’t decide on whether you’d prefer sushi or pizza.
What do you do?
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.
UTILITY
TRADE OFF
How much subjective usefulness you get from something
Choosing something means giving up on something else

9. Let’s say you chose pizza. What did you give up?
More on choice…
1pm – Sunday
Let’s say you chose pizza. What did you give up?
The value of what you gave up is called your opportunity cost. More specifically, it’s the total value of your next best choice.
Group and discuss: What’s the opportunity cost for you right now, being in this class?
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

10. Countries deal with this too..
Let’s do a simple example…
You are on a tiny island, and you only have one tree and a little bit of rope. The surrounding area is foggy, and you have a few hours until night time. There are enough small bits of wood to make a fire, but the wood is only good for burning.
You can decide to use the whole tree to make a small house, or you could use those same branches to make some fishing spears. You estimate you might be able to make 5 fishing spears.
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

11. Production Possibilities Curve
Shelter
Group and Identify:
Scarcity
Factors of Production (be careful!)
Trade Offs
Opportunity Costs
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP. 1
Fishing Spears 5

12. Growth vs. Development
The next day the fog has lifted just a little bit. Suddenly, you see another small island nearby with one more little tree, nearly identical to the first!
Graph.
Show the three efficient outcomes.
Day three – you see another small island nearby, with another small tree! Sadly this still isn’t enough wood for a boat.
Compare feelings between days two and three.
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

13. Growth and Development
Group, research, report:
What are “emerging markets” and what are some countries that fit this label?
How does the World Bank categorize the economies of countries? Provide examples for each category.
The United Nations Development Programme uses something called “HDI” – what is it and how is it used?
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.

14. Put it together! Use your 3C devices, and read this story:
Blizzard confirms “multiple Diablo projects” in production, news by end of 2018
In 250 words or less, write a short summary that includes at least three of the following concepts:
Scarcity, trade off, opportunity cost, utility, factors of production
And at least one graph:
PPC
Note: Stress to the students that GDP, and real GDP, are just statistical measures. They are positive, not normative. They should not be used to measure a nation’s self-esteem, or sense of overall happiness.
Many of the things that make people happy do not contribute to this statistic.
Taking time off from work to coach your child’s soccer team. Volunteerism detracts from GDP.
Many forms of leisure do not contribute to GDP. Read a book, take a walk, play catch with your child and you are hurting the economy.
Work around the house. If you rake your own leaves, rather than hire a company to do it, you detract from GDP. If you decided to drop out of the labor force to help raise kids, you detract from GDP.
Some things that contribute to GDP don’t make us happier.
Spending money to put bars in your windows because your neighborhood is unsafe will add to GDP.
Likewise, imagine two economies. One is based upon the buying/producing of assault rifles and one is based upon the buying/producing of ice cream. Both will add to GDP, but which is “better”?
Cleaning up after a natural disaster (Katrina, or a snow storm) will add to GDP.
Spending money to fight preventable diseases (emphysema) will add to GDP.