1. CHAPTER 1: What is Economics?

2. “The Science of Choice” Today’s objectives: – Define economics – Discuss why making choices are necessary – Explain the difference between a believer & non- believer’s perspective of economics John 14:6

3. Economics: “the common-sense science of how and why people, businesses, and governments make the choices they do.” (2) How is economics a “science”? – Observation: why choices are made – Predictions: what will people buy in the future – Alter the variables: attempting to control the future (by lowering-or raising-prices)

4. “Why do we make choices?” What are some of the choices you’ve already made today? What does the Bible say about making choices? – “No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money. (Matt 6:24)

5. Insatiability: “everyone has unlimited wants” (3) What is the difference between a WANT and a NEED? – Death and Destruction are never satisfied, and neither are the eyes of man. (Proverbs 27:20)

6. Scarcity: “everything is finite, or limited in quantity” (4) – There’s only so much money – There are only 24 hours in a day – There’s only so much water, food, etc. – Let’s read the green box on p 5… – Comments…

7. The most important Choice This makes it pretty clear to me… – Jesus answered, “I am the way and the truth and the life. No one comes to the Father except through me. (John 14:6)

8. Section 1B Objectives Differentiate between economic goods & services, nuisance goods, & free goods & services Define & contrast intrinsic & subjective value Describe the opportunity benefits & costs of a purchase

9. Economic cost: the value people place on goods & services Good: any physical (tangible) item that has a measurable life span-examples: shoes, clothes, glasses Service: intangible items-examples: labor, a performance

10. Economic goods & services have a positive economic cost (more than zero) Nuisance goods: goods that consumers pay to have taken away-example: trash Recycling: turning nuisance goods into economic goods Free goods: goods with a zero price tag- example: air & water

11. Free services: services with a zero price tag- example: wind from a windmill, a waterfall on a water wheel

12. Which is worth more? http://www.selectyourdiamond.com/how-to-appraise-a-diamond.php http://cnx.org/content/m42187/latest/?collection=col11406/latest

13. How about now? http://en.wikipedia.org/wiki/File:Karakum_Desert.jpg

14. How about now?

15. Intrinsic value: an item is valuable because of the nature of the product-such as scarcity or the amount of labor it took to produce it Subjective value: an item’s usefulness determines its value

16. Utility: usefulness & the amount of satisfaction one gets from a good he buys Opportunity benefits: the satisfaction one gets from a purchase Opportunity cost: the satisfaction one gives up (or regrets) from a purchase. The$30 decision pp9-10 Util: economic term for an imaginary unit of satisfaction

17. Group Work What are the opportunity benefits & costs of: 1. living in the city verses living in the country 2. Having the government provide shelter for the homeless verses having private charities to care for the homeless 3. Purchasing contact lenses versus buying glasses 4. Going to college to further your education versus heading right into the workforce

18. Section 1C objectives Define microeconomics & macroeconomics & differentiate between to two Define positive & normative economics & differentiate between the two Homework: read pp12-14; do section 1C review p14 (ALL 3 questions )

19. Microeconomics: choices made by individual units (people, households, private business) Macroeconomics: large scale economic choices & issues (bank interest rates, widespread unemployment) Positive economics: “the approach to economic study involving the observation of economic choices & the prediction of economic events” (p330) – Example: following 2 businesses on the stock market

20. Normative economics: “the approach to economic study involving value judgments about existing & proposed economic policies” (p330) Example: “It’s unpatriotic to buy foreign products” Menger proposed that an individual’s decisions are based on personal utility