1. Unit 1—Introductory Materials Chapters 1-3 2 weeks

2. The Nature and Methods of Economics Chapter 1

3. Economics:  Social science concerned with how people satisfy unlimited wants w/ limited resources.

4. Scarcity and choice  Scarcity requires that choices be made  There are always trade-offs when decisions are made  The cost of any good, service or activity is the value of what must be given up to obtain it = opportunity cost

5. Rational behavior  Rational self-interest entails making decisions to achieve maximum fulfillment of goals  Different preferences lead to different choices  Rational self-interest is not the same as selfishness—it guides the economy

6. Marginalism:  = extra, additional or a change in  Each option considered weighs the marginal benefit against the marginal cost  Whether the decision is personal or one made by business or gov’t, the principle is the same  The marginal cost should not exceed the marginal benefit  mc < mb

7. Why study Economic?  For citizenship --most political problems have an economic aspect --voters and elected officials can fulfill their role more effectively if they have an understanding of economic principles

8.  Professional and personal applications --understand TINSTAAFL --develop analytical skills --make intelligent decisions

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

10. Our 8 economic GOALS (page 9 in text)  Economic growth  Full employment  Economic efficiency  Price level stability  Economic freedom  Equitable distribution of income  Economic security  Balance of trade

11. Macroeconomics  Examines the economy as a whole  Includes measures of total output, total employment, total income, aggregate expenditures and general price level  Think of it as examining the forest—not the trees

12. Microeconomics  Looks at specific economic units  Concerned with the individual industry, firm or household and the price of specific products and resources  Think of it as examining the trees, not the forest

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