2. Welcome!

3. Happy New Year!!! This is a time of new beginnings with so many exciting things to do and learn. So Welcome to Economics class! I am looking forward to a happy and productive semester. This is a time of new beginnings with so many exciting things to do and learn. So Welcome to Economics class! I am looking forward to a happy and productive semester. I will be following the policies and procedures Mountain View has established. Included in this Power Point is information about those policies and procedures for this course. I will be following the policies and procedures Mountain View has established. Included in this Power Point is information about those policies and procedures for this course.

4. The Course at a Glance The five units we will be covering include: The five units we will be covering include: Unit 1 – Foundations of Economics, Trade, and Systems Unit 1 – Foundations of Economics, Trade, and Systems Unit 2 – Microeconomics Unit 2 – Microeconomics Unit 3 – Money and Monetary Policy Unit 3 – Money and Monetary Policy Unit 4 – Measurement and Fiscal Unit 4 – Measurement and Fiscal Unit 5 – Personal Finance and Investing Unit 5 – Personal Finance and Investing

5. Class Rules My three R’s: My three R’s: Be Responsible – All rules in the student handbook will be enforced. Be Responsible – All rules in the student handbook will be enforced. Be Respectful – Treat others the way you want to be treated. Be Respectful – Treat others the way you want to be treated. Be Ready – Come to class with a pencil, notebook and a positive attitude. Be Ready – Come to class with a pencil, notebook and a positive attitude.

6. Unit 1: Foundations of Economics

7. What is Economics? “A science that deals with the allocation, or use, of scarce resources for the purpose of fulfilling society’s needs and wants.” – Addison-Wesley “A science that deals with the allocation, or use, of scarce resources for the purpose of fulfilling society’s needs and wants.” – Addison-Wesley The study of how people seek to satisfy their needs and wants by making choices. The study of how people seek to satisfy their needs and wants by making choices.

8. What is Economics? The big two concepts are that: The big two concepts are that: Resources are scarce! Resources are scarce! Society has unlimited needs and wants! Society has unlimited needs and wants! Economics decides the “best” way of providing one to the other

9. Scarcity Definition: Definition: A situation in which the amount of something actually available would not be sufficient to satisfy the desire for it, if it were provided free of charge. A situation in which the amount of something actually available would not be sufficient to satisfy the desire for it, if it were provided free of charge.

10. Scarcity vs. Shortage Scarcity and shortage are NOT the same! Scarcity and shortage are NOT the same! Scarcity implies limited quantities of resources to meet unlimited wants. Scarcity implies limited quantities of resources to meet unlimited wants. Shortages occur when producers will not or cannot offer goods or services at the current prices. Shortages occur when producers will not or cannot offer goods or services at the current prices.

12. But this is America! Can’t we have whatever we want?

13. Imagine… Take out a piece of paper. Take out a piece of paper. I know you are so excited to be here! I know you are so excited to be here! Write 5 things you would rather be doing this hour. Write 5 things you would rather be doing this hour. Put a star by the one you would pick first. Put a star by the one you would pick first. This one choice is your opportunity cost for being here. This one choice is your opportunity cost for being here.

14. Opportunity Costs vs. Trade Offs Opportunity cost is the most desirable alternative given up as the result of a decision. Opportunity cost is the most desirable alternative given up as the result of a decision. This is the second best choice (the best choice is your being here) This is the second best choice (the best choice is your being here) Trade-Offs are all the alternatives given up as the result of a decision. Trade-Offs are all the alternatives given up as the result of a decision.

15. Thinking at the Margin Definition: Definition: Deciding whether to do or use ONE ADDITIONAL unit of some resource. Deciding whether to do or use ONE ADDITIONAL unit of some resource. Examples: Examples: Every bite of a meal is a choice for someone who is dieting. Every bite of a meal is a choice for someone who is dieting. Smoking will cause cancer! Smoking will cause cancer! Studying for a better grade. Studying for a better grade.

16. Scarcity Economists say that all goods and services are scarce because the factors of production are scarce. Economists say that all goods and services are scarce because the factors of production are scarce. What are the factors of production??? What are the factors of production???

17. Factors of Production There are 4 factors that must all be used to produce anything: 1. Natural Resources (also referred to as “land”)

18. Factors of Production There are 4 factors that must all be used to produce anything: 2. Labor – effort of a person for which they are paid

19. Factors of Production There are 4 factors that must all be used to produce anything: 3. Capital – human-made resources used to create other goods

20. Factors of Production 3 Kinds of Capital Physical Capital – Also called Capital Goods, objects that are used to produce other goods

21. Factors of Production 3 Kinds of Capital Human Capital – knowledge or skills workers get from education and experience

22. Factors of Production 3 Kinds of Capital Financial Capital – money needed to begin production of a good or service

23. Factors of Production There are 4 factors that must all be used to produce anything 4. Entrepreneurship – person who takes a risk in combining the other 3 factors to create a new good

24. Making Economic Decisions Every decision we make involves trade-offs – alternatives that we must give up when we make a choice Every decision we make involves trade-offs – alternatives that we must give up when we make a choice Example – “I could stay up for 3 hours playing Halo, study, or sleep.” Example – “I could stay up for 3 hours playing Halo, study, or sleep.”

25. Making Economic Decisions The most desirable of the options you pass up is called the Opportunity Cost The most desirable of the options you pass up is called the Opportunity Cost Rank sleep, studying, and playing video games 1 st, 2 nd, and 3 rd on a list for what you value the most

26. Making Economic Decisions 1 st Place is what you would choose to do 1 st Place is what you would choose to do 2 nd Place is your opportunity cost (you give it up to do option 1) 2 nd Place is your opportunity cost (you give it up to do option 1)

27. Making Economic Decisions What other option do you have other than using 3 hours for one task? What other option do you have other than using 3 hours for one task? You could split your time among multiple activities! You could split your time among multiple activities! Thinking at the Margin – decision involving adding one unit and subtracting one unit, rather than all or nothing Thinking at the Margin – decision involving adding one unit and subtracting one unit, rather than all or nothing

28. Making Economic Decisions OptionsBenefit Opportunity Cost 0 hours studying, 3 hours sleeping F on Test None 1 hours studying, 2 hours sleeping C on Test 1 hour of sleep 2 hours studying, 1 hour sleeping B on Test 2 hours of sleep 3 hours studying B+ on Test 3 hours of sleep

29. Making Economic Decisions There is a point at which you are paying the same increase in cost, but seeing lower benefits There is a point at which you are paying the same increase in cost, but seeing lower benefits You must make the decision as to whether the cost is worth it You must make the decision as to whether the cost is worth it This same process is used by businesses and consumers to make decisions This same process is used by businesses and consumers to make decisions

30. Production Possibilities Production Possibilities Graph – shows alternatives to what an economy can produce Production Possibilities Graph – shows alternatives to what an economy can produce Let’s say we can produce 2 things: Guns and Butter Let’s say we can produce 2 things: Guns and Butter

31. Production Possibilities

32. Production Possibilities Graph – shows alternatives to what an economy can produce Production Possibilities Graph – shows alternatives to what an economy can produce The outer red line shows the maximum possible output with any given combination The outer red line shows the maximum possible output with any given combination This is the Production Possibilities Frontier This is the Production Possibilities Frontier

33. Production Possibilities To move from one point to another, the economy must make trade- offs

34. Production Possibilities Any point along the line shows the economy operating at maximum efficiency Any point along the line shows the economy operating at maximum efficiency Any point below the line is underutilization – they are not getting all that they could Any point below the line is underutilization – they are not getting all that they could Any point above the line is presently impossible, until new resources are available Any point above the line is presently impossible, until new resources are available

35. Production Possibilities Why does the graph curve instead of making a straight line? Why does the graph curve instead of making a straight line? Law of Increasing Costs – as production increases for one item, amount needed as tradeoff increases as well Law of Increasing Costs – as production increases for one item, amount needed as tradeoff increases as well

37. Production Possibilities Every resource is best suited for certain types of goods Every resource is best suited for certain types of goods Farmland and cows make butter Farmland and cows make butter Metals and factories make guns Metals and factories make guns To convert butter production to guns, you must sell the cows and build new factories on the land To convert butter production to guns, you must sell the cows and build new factories on the land