1. Do now: Address the question below to the best of your ability. Tom has two two choices. He can either spend his money on: 1.Going to the movies with friends $10.00 2.Buying his Dad a baseball cap for his birthday : $12.00 Tom chooses to go to the movies. What did the choice of this opportunity cost Tom?

2. Once you use a resource (time, money etc…) you cannot use it again. Therefore the opportunity-cost of going to the movies has cost Tom: The $10. 00 spent for the movies. The opportunity of buy his dad the baseball cap The time that he spent at the movies the “opportunity cost” of a resource, means the value of the next-highest-valued alternative that can use that resource.

3. Economics as a Positive Science

4. The Distinction between Positive and Normative Economics Positive Economics - is objective and fact based. They must be able to be tested and proved or disproved. Normative Economics is subjective and value based. Since they are opinion based, they cannot be proved or disproved.

5. Government run healthcare increases how much people spend on healthcare. The United States has the largest number of cars, per capita. EXAMPLES: Positive Normative The government should provide basic healthcare to everybody. Americans enjoy driving more than the people of other nations.

6. Government run healthcare increases how much people spend on healthcare. The United States has the largest number of cars, per capita. How could you try and prove these “positive economic” statements?

7. The Tools of Economics

8. The Scientific Method

9. PROBLEM: Economics cannot usually be tested in a laboratory. –Therefore economists must analyze existing data to come to conclusions about their topic

10. Graphs – a two dimensional representation of the relationship of two given sets of data. These sets of data are usually known as variables. A variable is a quantity that can change

11. Normative Statements Statements about how things ought to be are called normative statements. Thus, normative statements involve value judgement which cannot be refuted through reasoning or an appeal to facts.

12. Examples You should be good to your parents. You should respect your Economics teacher, Mr So. Progressive tax system is good because it can help the poor. How can we know whether the above statements are right or wrong?

13. Examples I was born in Beijing. Helen is studying economics in the library. My economics class has been changed to Tuesday. How can we know whether the above statements are right or wrong?

14. Testable (If you are kind to you parents, you will go to heaven after you die.) Refutable A scientific theory must be potentially refutable.

15. Positive Economics Positive economics only describes and relate observable facts without saying whether they are good or bad. In other words, it only deals with positive statements.

16. Examples If the price of a good increases, the quantity demanded will increase, other things being constant. If money supply increases, inflation rate will increase. If the supply of a good decreases, the price of the good will increase, other things being constant.

17. If I were the Manager, I would earn more profit for the company than Mr Lee. If I were the Chief Executive of Hong Kong, I could do better than Mr Tung.

18. Hypothetical Situation: Every time the temperature in Florida goes above 95 for an entite week, the price of grapefruits per pound increases What sort of research would you need to do to prove this statement is TRUE ? What information would you need to have?

19. 1.In your notebook, propose an economic topic that could be examined with the scientific method. 2.Using the “Scientific Method Chart” that you have copied, create a hypothetical step by step examination of the issue you have proposed.

20. The Scientific Method

21. A theory consists of: 1. variables (dependent and independent) 2. assumption(s) 3. hypotheses 4.prediction(s)

22. Quiz What is the difference between positive statements and normative statements? What are the uses of scientific theories? What are the 4 basic elements of a scientific theory?

23. Economic Theory Example: Demand Theory If the price of a good increases, the quantity demanded of it will decrease, other things being constant.

24. Characteristics of Scientific Theories What are the uses of theories? What are the differences between scientific theories and superstition? Is it possible to prove that a theory is always right?