Download CH. 1 WHAT IS ECONOMICS?

Learning Objective:
Today I will be able to use common
economic terms/concepts by trading off
scarce items to define opportunity cost.
Agenda:
1) Learning Objective
2) Lecture: Ch. 1 What is Economics?
3) Brown Bag Trade Off
4) Vocabulary Ch. 1
5) Exit Slip
What is
Economics?
(video)
• Title Notes: CH. 1 WHAT IS
ECONOMICS?
• Scarcity:
– Ppl have unlimited wants, but not enough
resources.
What is an example of limited resource that is needed in CA, but
it is also an unlimited want?
• Productive Resources: inputs used to produce
goods & services ppl. want.
• What is the economic problem? Why does it
make choice necessary?
3 Types of Productive Resources
Human
Resources
Natural
Resources
Capital
Goods
• Labor
• Entrepreneur
• Ex.
Ex.
Ex.
What is Economics????
• Economics:
– Examines how ppl. use scarce resources to satisfy
their unlimited wants
What is
economics?
• Good: physical, requires scarce resources to
produce & satisfies human wants.
– Ex.
• Service: not physical, requires scarce resources
and satisfies human wants.
– Ex.
• NO SUCH THING AS A FREE LUNCH
– All goods is a cost to someone, b/c it takes away scarce
resources from the production of other goods.
Why are goods and services scarce?
What would you rather do right now
instead of being in school?
Brown Bag
Trade Off!!
Brown Bag Trade Off
• Step 1: Open your bag. Look inside. DO NOT
TAKE OUT OR SHOW ANYONE!!!
• Step 2: You will trade with a group.
• Step 3: Regroup and trade again.
• Step 4: Reflect
Step 7: Reflect
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How many people made trades?
What did you trade? Why?
How did you feel after your trade?
What was the opportunity cost of your trade?
Did you trade more than once? Why?
Did anyone not trade? Why?
Why do people trade?
Why is it NOT possible to trade without bearing a
cost?
• What were the scarce items everyone wanted?
• Opportunity cost
• Is an opportunity lost
– value of the best alternative passed up.
• Sunk cost: a cost you already incurred and cannot
recover, regardless what you do now.
– Ignore Sunk Cost; it’s irrelevant & not recoverable
• Don’t cry over spilt milk! What’s done is done and move on.
Time & Information
– affect your decision & opportunity cost.
• Economic theory
– make predictions about the real world.
– Assuming other things remain constant (no change)
– Behavioral assumption (predict how ppl. will behave)
– Rational self-interest
• Marginal: incremental, extra,
or one more.
– Rational decision maker will
change status quo as long as the
expected marginal benefit from
the change exceeds the
expected marginal cost.
– Requires information and time
• Marginal benefit
– The extra added satisfaction
• Marginal cost
– The extra added cost or time
• Market economics:
• It is microeconomics, examines
factors that influence individual
economic choices and how
markets coordinate choices of
various decision makers.
• National economics
• macroeconomics, focuses on
performance of the economy as
a whole, especially national
economics.
• Markets:
• place by which buyers & sellers
carry out exchange. Thus
creating supply/demand &
determines price and quantity.
Circular Flow Model
Exit Slip
What is YOUR opportunity cost for
being here in class?
My opportunity cost is _________________.