1. Warm Up 1.What is economics? 2.What do economics do?

2. Economics Defined Economics is the study of how people and societies use limited resources to satisfy their unlimited wants Simply put…economics is the study of scarcity and choice

3. What Do Economists Do? Professionals who study the ways society allocates its resources to satisfy its wants Spend much of their time gathering and analyzing data Enables them to identify problems and suggest solutions

4. Microeconomics vs. Macroeconomics Microeconomics – The study of the effects of forces on individual parts of the economy (businesses, households) – What will happen to sales if we increase prices Macroeconomics – The study of the impact of changes on the economy as a whole – How will a decrease in defense spending affect the nation’s businesses

5. What is v. What ought to be There are 2 worlds – What is – What ought to be What is – Causes and effects of specific event – How would a 10% increase in minimum wage affect business profits Economists have different views of what ought to be!

6. Using Economic Models 3 forms – Statement – Graph – Formula Economists use models to make predictions about how a change in one variable will affect others

7. Ceteris Paribus Other things being equal People will buy more of an item at a lower price than at a higher one, all other things being equal Economics will focus on one or two variables to solve a problem knowing that others exist

8. The Role of Money Barter Money can be anything – Romans used salt – Native Americans used shells – Aztecs used beans What does money do? – Medium of exchange – Standard of value – Store of value

9. Kinds of Money Currency – Coins (4% of the nation’s $ supply) – Paper (50% of the nation’s $ supply) Checkbook Money – 50% of the nation’s $ supply

10. Do Now Why is economics called a study of scarcity and choices? “people cannot eat machinery or factory buildings. That is why poor countries should concentrate on agriculture and leave manufacturing to the industrialized nations” – Do you agree? Disagree? Why?