1. Economics Instructor: Mr. Sheehan

2. Let’s Get Started  Do Now:  You are at a grocery store that has several checkout lanes open. It is a crowded day, and people are in every line. What lane would you choose when you checkout? Bullet point your thought process on a sheet of paper. You have 2 minutes  Objectives:  Be able to answer the question – What is Economics?  Define and Understand: Scarcity, Opportunity Cost, and Marginal Analysis  Go Over the Syllabus  Do Later:  Actively read and take notes on the 1 st half of Chapter 3  Hand in your answers to the Production Possibility Curve and Marginal Analysis questions

3. What is Economics?  Economics – is the study of how people choose to allocate their scarce resources  Three common elements of Economic Models:  Scarcity  Opportunity Cost  Marginal Analysis

4. Scarcity  Scarcity – people wanting more than can be satisfied with available resources  A good is scarce if another unit of the good would benefit someone. The good is scarce if when price of the good is zero (it is free) the quantity people demand (wants) exceeds its supply.  Are the following goods scarce?  Fresh Air  Monster Drinks  Money  Time

5. Opportunity Cost  Opportunity Cost – value of the best alternative that had to be forgone in order to undertake a given course of action.  The value of the best forgone alternative use  This emphasizes that had people not made the choice they did, they would have chosen the next best alternative  Example:  If Hyde decides to hire two new teachers for three Positions: teaching Biology, teaching Linear Algebra and teaching Intro to Native American studies. The biology class has a value to the school of $200,000, L.A. has a value of $100,000 and INAS has a value of $20,000.  Which two teachers does Hyde Choose? What is the Opportunity Cost of the teachers chosen?  What are the trade-offs?

6. Production Possibility Curve ChairsBenches Time Spent (hours) Product Made Time Spent (hours) Produc t Made 00420 14318 27214 3918 41000  Efficiency  Economic Growth PPC – show trade-offs people face because of the scarcity of resources

7. Marginal Analysis  Process of determining which goods SHOULD be produced to use resources most effectively.  Determine if Benefit from producing one more unit is greater than the cost of that unit, you should.  Net Benefits = Total Benefits – Total Costs  Example: Should a firm Produce More?  A firm’s net benefit of being in business is its profits. The following formula illustrates how profits are calculated Profits = Total Revenue – Total Costs  International Widget is producing 50 widgets at a cost of $50,000 and is selling them for $60,000. If it produces a 51 st unit, its total sales (total revenue) will be $62,000 and its total cost will be 51,500. Should the firm produce the 51 st unit?

8. Do Later:  Create a Production Possibility Curve for the following data. What would be the most efficient use of your time?  International Widget is producing 50 widgets at a cost of $50,000 and is selling them for $60,000. If it produces a 51 st unit, its total sales (total revenue) will be $62,000 and its total cost will be 51,500. Should the firm produce the 51 st unit? If so, Why? English Reading History Reading Time Spent (hour s) Pages Read Time Spent (hour s) Pages Read 0046.5 1236 2325 3413 4500