1. Economics “Econ, Econ” Econ

2. Unit 1: Basic Economic Concepts

3. What is Economics? Economics is the study of _________. Economics is the science of scarcity. Scarcity means that we have 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. choices In economics we will study the choices of individuals, firms, and governments.

4. Textbook Definition Economics- Social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants. In Other Words: Using what you have to get what you want. 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 welfare.

5. Micro vs. Macro MICROeconomics- Study of small economic units such as individuals, firms, and industries MACROeconomics- Study of the large economy as a whole like city, state or national economies

6. How do we make choices? Write down five choices you have made today.

7. Would you see the movie three times? Notice that the total benefit is more than the total cost but you would NOT watch the movie the 3 rd time. Thinking at the Margin # Times Watching Movie BenefitCost 1st$30$10 2nd$15$10 3rd$5$10 Total$50$30

8. Marginal Analysis In economics the term marginal = additional “Thinking on the margin”, or MARGINAL ANALYSIS involves making decisions based on the additional benefit vs. the additional cost. For Example: You have been shopping at the mall for a half hour, the additional benefit of shopping for an additional half-hour might outweigh the additional cost (the opportunity cost). After three hours, the additional benefit from staying an additional half-hour would likely be less than the additional cost.

9. The MARGINAL ANALYSIS approach to decision making is more comely used than the “all or nothing” approach. Notice that the decision making process wasn’t “should I go to the mall for 3 hours or should I stay home” In reality the decision making process started with “should I go to the mall at all.” Once you are there you thought “should I stay for an additional half hour or should I go.” Marginal Analysis

10. The MARGINAL ANALYSIS approach to decision making is more commonly used than the “all or nothing” approach. Notice that the decision making process wasn’t “should I go to the mall for 3 hours or should I stay home” In reality the decision making process started with “should I go to the mall at all.” Once you are there you thought “should I stay for an additional half hour or should I go.” Marginal Analysis You will continue to do something until the marginal cost outweighs the marginal benefit.

11. Scarcity

12. Review with your neighbor… 1.Define scarcity 2.Define Economics 3.Identify the relationship between scarcity and choices 4.Explain how Macroeconomics is different than Micro 5.Give an example of marginal analysis 6.Name 10 Disney movies

13. Paul Solman Video: Opportunity Lost

14. Econ in Music The Clash – Should I Stay or Should I go 14 What concept is discussed in the song? What is Marginal Analysis? What is the opportunity cost? Are there any marginal benefits?

15. Economic Goals What is a good economy? Goals Efficiency 15

16. 4 Main Goals of an Economy Economic Growth – produce more and better goods and services Full Employment – provide jobs for anyone WILLING to work Price Stability – Avoid inflation or deflation Economic Efficiency – Make best use of available resources 16

17. Efficiency Productive Efficiency Allocative Efficiency 17 Productive Efficiency – Producing goods and services in the least costly way Productive Efficiency Allocative Efficiency – Producing goods wanted by society Quantity vs. Quality

18. “Social” Economic Goals Economic Freedom – Everyone has freedom to do what they want Equal Distribution of Wealth – none too rich or too poor Economic Security – Providing disabled with means of earning income Balance of Trade – Balance with the rest of the world 18

19. Services = actions or activities that one person performs for another (teaching, cleaning, cooking) Goods = physical objects that satisfy needs and wants Give examples… Goods vs. Services 19 Luxury = goods and services that are not considered essential Necessity = goods and services that are considered necessary in a particular market

20. Types of Goods Consumer Goods- created for direct consumption (example: pizza) Inferior Goods-purchase less when your income increases Used cars, generic brands, Spam Normal Goods- purchase more when your income increases Most goods and services Capital Goods- created in order to increase production (oven, blenders, knives, etc.) Goods used to make consumer goods