Download Chapter 1 Overview - Central Bucks School District

WELCOME TO
AP MACROECONOMICS!
Mrs. Brouda, CB South High School
2012-2013
Real Life Economics


5 minutes
Play as many games of Rock-Paper-Scissors
 Winner
earns candy of choice
 Continue playing into you have the desired candy
(or none at all)

Why did we do this?
Introductions


Find your matching “Brouda-fact”
Interview your partner
 Name
 Best
thing about being a senior
 Post high school plans
 Preferred superpower—Fly OR Be invisible


Return to Your Seat
Introduce Your Partner to the Class
Contact Information
Mrs. Brouda
http://www.youtube.com/watch?v=CZI152QbNwI
Email
Phone
Website
Courses Taught:
1st Block
2nd Block
4th Block
[email protected] (preferred method)
267-893-3000 x 3178
www.moourl.com/brouda
Global Relations
AP Macroeconomics
AP Macroeconomics
Seating Chart
Course Website

You are encouraged to check the course site.
 http://moourl.com/brouda
 OR
 http://www1.cbsd.org/sites/teachers/hs/tbrouda


A calendar of assignments can be found on
the course website.
Note guides for nightly readings and copies
of class handouts are available as well
Course Highlights



18 week course satisfies senior Social Studies
requirement
Use college text and supplemental resources to
prepare for May 16, 2013 exam
Course topics include basic economic principles,
national income and price level determination,
fiscal and monetary policy, and international
finance and trade.
Units of Study
1
2
3
4
• Basic Economic Principles (3 weeks)
• National Income & Price Level
Determination (6 weeks)
• Fiscal & Monetary Policy (6 weeks)
• International Finance & Trade (3 weeks)
Classroom Expectations




RESPECT!
Academic Integrity
All school policies regarding cell phones,
electronics, tardy are in effect
Students are responsible for making up missed
assignments.
 Daily
handouts are available on the Sharepoint site.
 Students have 1 day to make up assignments for
each day absent (3 for major assignments)

Long term projects and writing assignments
receive a 10% deduction for each day late.
Grading Policies

The district grading scale will be followed.

Marking Period Grade:
Tests
60%

Quizzes
10%
Group Research
Podcasts
10%
Core
Assignments
10%
Blackboard
Discussions
10%
Final Course Grade:
 80%
comes from marking period grade (see above).
 20% comes from the district-wide final exam.
 Cumulative Exam:
30pt essay and 70pt multiple choice.
Upcoming Assignments

Unit Tests approximately every 2 weeks.
 Unit
1 Test is February 15th
Defining Economics


Complete the pre-test (5 minutes)
Work with a partner to complete definition on
reverse side (5 minutes)
Why Economics?


Did you know? 3.0
Knew, New & a Question
1
thing you knew
 1 thing that was new (and interesting)
 1 question
AN ECONOMIC WAY OF
THINKING
Ch. 1
You Can’t Always
Get What You Want…
“And you can’t always get what
you want,
Honey, you can’t always get
what you want
You can’t always get what you want
But if you try sometime, yeah,
You just might find you get what you need!”
-Mick Jagger and Keith Richards
1969
Simply stated, this chorus
explains why everyone has
to make choices…
Essential Question
Why can’t you always
get what you want?
We will explore this
question in Unit I…
What do we do when resources are scarce?
SCARCITY SIMULATION
Faced with the fundamental economic problem…
THE BEST DECISIONS ARE PACED
PACED Decision Making
?
• P-What is the PROBLEM?
• A-What are the ALTERNATIVES
• C-What CRITERIA are important to the
decision?
• E-EVALUATE each alternative with the criteria
• D-DECIDE among alternatives
Scarcity Simulation
• Divide into groups of 4 OR 5 (your
choice!)
• Consider the scarce resource
• Complete the PACED model in your
group
– Everyone must submit a copy to
receive credit
PACED Decision Making
?
• P-What is the PROBLEM?
• A-What are the ALTERNATIVES
• C-What CRITERIA are important to the
decision?
• E-EVALUATE each alternative with the criteria
• D-DECIDE among alternatives
PACED Decision Making Process
• 5 Minutes: Brainstorm for alternative ways of
resolving the problem you group faces. Rule
nothing out.
• 10 Minutes: Complete the balance of the
chart with your group
– Criteria
– Evaluation
– Decision
• Appoint one representative to report your decision
Criterion Criterion
Criterion
Rank
Rank
Rank
Alternative
1
Alternative
2
Alternative
3
Alternative
Criterion
Rank
Scarcity Debriefing (5 minutes)
• On the reverse side of your handout briefly
respond to the following:
– Define scarcity in your own words
– What was the scarce good in our simulation?
– Why was it scarce?
– How criteria help you decide among alternative
allocations for the good?
– Do you agree with your group’s decision for the
good? Explain why or why not.
Economics: The Core Issues
Chapter 1
Economics
• Economics is the study of how best to allocate
scarce resources among competing uses.
• Define this in your own words
To solve economic problems,
3 core issues must be resolved:
• WHAT to produce with our limited resources.
• HOW to produce the goods and services we
select.
• FOR WHOM goods and services are produced;
that is, who should get them.
LO2
Why is what we want scarce?
• Scarcity: the lack of enough resources to
satisfy all desired uses of those resources
Why does this condition arise?
• Wants > Resources
• Goods and services are scarce because the
resources needed to produce them are scarce!
Everything is Scarce!
Activity…Why is what we want
scarce?
Look around the classroom…
1. List 3 goods that you see in the classroom
and 2 services that exist in this school.
2. Explain why these goods/services are scarce.
How did the
goods/services
get here?
Nothing
appears
magically…
These
goods/services
were produced to
satisfy our wants…
Essential Question:
How do we satisfy
our economic
wants?
• Factors of production are resource
inputs used to produce goods and
services.
Factors of Production
• Land refers to all natural resources such as
crude oil, water, air, and minerals.
Labor refers to the skills and abilities to
produce goods and services.
If the production at South is student
achievement,
What land is used?
What labor is needed?
Factors of Production
• Capital includes the final goods produced for
use in the production of other goods, e.g.,
equipment, structures.
Entrepreneurship is the assembling of
resources to produce new or improved
products and technologies.
If the production at South is student achievement,
What capital is used?
What entrepreneurship is needed?
Check Up:
Factors of Production
Which factor of production is each of the following?
1.
2.
3.
4.
5.
Trees in a forest
Cook in a restaurant
Tractor used to plow fields
Ice cream store owner
Freezer in the ice cream store
6.
7.
8.
9.
10.
Rocks
Lumber sitting at Home Depot
Iron ore
Fish in the ocean
An economics teacher at South
Visualizing the Relationship…
Limited Resources &
Unlimited Wants
Scarcity
Trade-offs (choices)
Opportunity Costs
Trade-offs
• Definition: alternative choices
• Choices must be made to satisfy our wants
and needs (scarcity … wants > resources)
• Each choice in a trade-off has advantages and
disadvantages.
Examples…
• Some choices are easy to make…
– Hmm…
Should I have pizza or a hoagie
for lunch today?
• Other decisions are agonizing…
– Should I get out of bed and go to
school today or should I sleep in?
Today’s Simulation
• Groups had to decide among alternatives
– Easy choice? Difficult?
– Value of criteria in making decisions?
• What trade offs did you experience?
– Fairness vs. Equality
– A chance a whole candy bar vs. just a taste
Reflecting on Personal Trade-offs…
Write down three examples of a trade-offs
you made in the last week…
Be prepared to share!
Opportunity Cost
• When comparing the top 2 choices, it is the
BENEFIT of the next best alternative that must
be sacrificed to satisfy a want.
– Not all possible things given up.
The best thing we give up to get
what we want.
Considering the Opportunity Cost
of Personal Trade-offs…
Revisit ONE trade-off listed above…
What was the opportunity cost?
Be prepared to share!
Reviewing Opportunity Cost…
What opportunity cost arises from each of the following
trade-offs?
 I packed my lunch rather than buying it so I would have
money to go out to dinner on Friday.
 I went to work on Thursday night to earn money rather
than studying for a test I had on Friday.
 I did not go to the movies with my friends so I would have
money to buy gas.
 I turned down an offer to Goucher College [on full
scholarship] so I could go to Bryn Mawr.
ESSENTIAL QUESTION
How can we measure what
we are gaining and losing
when making choices?
Measuring Opportunity Cost Graphically…
Production Possibility Curves
Production Possibility Frontier [PPC]:
• Represents ALL combinations of total output
that could be produced when ALL resources are
fully employed and used efficiently.
Why is the PPC curve downward sloping?
• Trade-offs
– We are always making a choice
and giving something up
Young Mrs. Brouda had a farm…
• 100 acres
– Grow 100 apple trees
and 0 pear trees
– Grow 50 pear trees and
0 apple trees
Young Mrs. Brouda had a farm…
• 100 acres
– How would an
economist describe 20
apple trees and 5 pear
trees?
– How would an
economist describe 50
apple trees and 50 pear
trees?
Young Mrs. Brouda had a farm…
• 100 acres
– What is the opportunity
cost of growing an apple
tree?
– What is the opportunity
cost of growing a pear
tree?
Production Possibilities Illustrates Two Essential
Principles
• Scarce resources – there’s a limit to the amount
we can produce in a given time period with
available resources and technology.
• Opportunity costs – we can obtain additional
quantities of any desired good only by reducing
the potential production of another good.
LO1
Law of Increasing Opportunity Costs
• Resources do not transfer perfectly from the
production of one good to another.
• Increasing quantities of any good can be
obtained only by sacrificing ever-increasing
quantities of other goods.
• Resources used to produce trucks aren’t ideally
suited for producing tanks.
Law of Increasing Opportunity Costs
OUTPUT OF TRUCKS
5
A
Step 1: give up one truck
B
4
3
2
Step 2: get two tanks
Step 3: give up another truck
C
Step 4: get one more tank
D
E
1
0
1
2
3
OUTPUT OF TANKS
4
5
F
Guns & Butter vs. Apples & Pears
• Tanks and Trucks –curved PPC
– Resources not interchangeable in trade off from one to
another
– Guns-Butter trade off points to decisions countries face
• i.e. North Korea vs. Finland
• Apples & Pears—a straight line PPC
– Resources needed are interchangeable
– Opportunity cost of one item to another fixed
Efficiency
• Efficiency means getting the maximum output
of a good from the resources used in
production.
• Every point on a production possibilities curves
is efficient.
Inefficiency
• A production possibilities curves shows
potential output, not necessarily actual output.
• If we are inefficient, actual output will be less
than the potential output.
Inefficiency
• Countries may end up inside their production
possibilities curve if resources are inefficiently
combined.
Such inefficiencies plagued centrally
planned economies.
Unemployment
• Countries may end up inside their production
possibilities curve if all available resources are
not used.
Unemployment
OUTPUT OF TRUCKS
5
A
4
B
3
Y
2
C
Unemployment
1
0
1
2
3
OUTPUT OF TANKS
4
5
Economic Growth
• A point outside the production possibilities
curve suggests that we could get more goods
than we are capable of producing!
• Economic growth is an increase in output (real
GDP) – an expansion of production possibilities.
Economic Growth
OUTPUT OF TRUCKS
5
A
X
Currently not attainable
B
4
C
3
2
1
0
1
2
3
OUTPUT OF TANKS
4
5
Problem Set # 1
• A society can make either guns or butter
• Put guns on the x-axis and butter on the y-axis
• Label the following points:
Point
A
Guns
5
Butter
3
B
3
9
C
1
15
X
5
5
Y
1
1
Problem Set # 2
• A society can make either Jeeps (x-axis) or Cars (y-axis)
• If the economy makes
100 cars, it can’t make
any jeeps
• If the economy makes
200 jeeps, it can’t make
any cars
Problem Set #3 - Exploring the Essential Question
• Imagine that a new society, Paternoville, produces only two
items: Footballs and Peachy Paterno Ice Cream.
• Use the information on the table below to construct a Production
Possibilities Frontier with Footballs on the x-axis and Peachy
Paterno Ice Cream on the y-axis.
Footballs
Peachy Paterno Ice
Cream (gallons)
100
0
90
4
75
8
50
12
0
16
1.
If the economy is currently producing 90
footballs, what is the opportunity cost of
producing 10 additional footballs?
2.
What is the opportunity cost of increasing
the annual output of Peachy Paterno Ice
Cream from 8 to 12 gallons?
3.
If there were a labor shortage or some
other event that effects production,
where would the output of Paternoville
production appear on the graph?
4.
What would happen to Paternoville’s PPF
if a technological advancement improved
production across the board?
The Mechanism of Choice
• An economy is largely defined by how it
answers the WHAT, HOW and FOR WHOM
questions.
LO3
A Theoretic Continuum
Smith
Keynes
Marx
Conservative
Government
Intervention
Government
Coordination
Laissez Faire
A Mixed Economy
• A mixed economy is one that uses both
market signals and government directives to
allocate goods and resources.
• Most economies use a combination of market
signals and government directives to select
economic outcomes.
LO3
Market Failure
• Market failure: allocation of goods and
services (answers to the 3 questions) under a
free market are inefficient
• Can you think of an example of a market
failure?
A market failure…
• Coal fired power plants may provide electricity
at the lowest price (most efficiently), but who
bears the cost?
Government Failure
• Government intervention may move us closer
to our economic goals or it may fail.
• A government failure is government
intervention that fails to improve economic
outcomes.
• Can you think of an example of a government
failure?
A government failure…
• Centrally planned economies could not keep
up with the modern world…
Seeking Balance
• The challenge for society is to minimize
failures by selecting the appropriate balance
of market signals and government directives.
• Which economist would agree most?
Macro Versus Micro
• Macroeconomics is the
study of aggregate
economic behavior, of
the economy as a
whole.
• Microeconomics is the
study of individual
behavior in the
economy, of the
components of the
larger economy.
Theory Versus Reality
• The economy is much too vast and complex to
describe and explain in one course (or one
lifetime).
• Economists use theories, or models, of
economic behavior to evaluate and design
economic policy.
Theory Versus Reality
• In these theories, we typically ignore the
possibility that many things can change at one
time.
Ceteris paribus is the assumption that
nothing else is changing.
Smith, Marx and Keynes
A GREAT DEBATE
3 men walk in…
• Divide into 3 groups
– A: Notes and Web Search on Smith
– B: Notes and Web Search on Marx
– C: Notes and Web Search on Keynes
• How would each respond to the questions of
WHAT, HOW, and for WHOM?
– Identify a country who’s economic policies mirror your
theortist
– Complete chart summarizing position & critique
– Create poster for sharing with the class
The Fight!
• Opening Statements
(3 min per economist)
• Rebuttal
(5 min per economist)
– Includes 2 questions
directed at each economist
& response
• Closing Statements
(2 min)
• Debrief—why this
matters
Roles
• Opening Statement: 3
ppl (one per economist)
• Rebuttal: 2 ppl—one ?
to each economist
• Response: anyone, as
needed
• Closing Statement: 3
ppl (one per economist)