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ECONOMICS CSI – UNIT 1 – 2015 WARM UP With a partner: What is economics? Why do we trade (buy & sell) goods and services? What are the most bizarre goods and services you have seen sold or advertised? DEFINING ECONOMICS Study of production, distribution, & consumption of material goods and services in a society Purchases Jobs International Trade Inventions Capital Labor Industries Stocks TRADE To exchange something you have for something someone else has WHY? To obtain something we need or want & we have something they need or want Both sides benefit, even if trade seems unfair Little Brother Example Backbone of economics MARKETS Places where things are bought and sold Black Market Items Human organs South Africa – kidneys - $100,000 Albino people? Basic unit of economics Not always open Capitalist society = items sold openly on the street or in stores Black Markets / Underground Markets in place to avoid government restrictions Animal Organs Bear Gall Bladder - $30,000 Weapons Alcohol Tobacco Counterfeit Medicine Prostitution SCARCITY Limited resources, but unlimited wants Investopedia Video Clip: http://www.investo pedia.com/terms/s/s carcity.asp [1:35] SUPPLY & DEMAND Supply = how much there is Demand = how much is wanted Quantity demanded is high when the price is low Quantity supplied is high when price is high Economists try to determine the equilibrium price where demand = supply Both shortage & surplus are not good SUPPLY & DEMAND Limited resources in the world Markets are driven by supply & demand set a price to regulate how much of the resources are consumed Consider: Why is a DVD player inexpensive, but a Blu-Ray player expensive? Why do people pay $20, $50, or $100 for Legos? Why does college cost so much today? Why are athletes paid so much? Why are the women’s US soccer team paid less than the men’s soccer team? Why is food so cheap today? SUPPLY & DEMAND ACTIVITY With a partner: Name 5 items that have changed in price because of fluctuating supply & demand Example: Beanie Babies – formerly a huge demand & limited supply, now a huge supply & limited demand OPPORTUNITY COST & COMPARATIVE ADVANTAGE Opportunity Cost = what you give up for something else Example: The opportunity cost of going to college is whatever money you’d have made if you went to work for those few years Comparative Advantage = when you can produce something at a lower cost than anyone else Undercuts protectionism & mercantilism On the Principles of Political Economy & Taxation, David Ricardo, 1821: “TO produce wine in Portugal, might require only the labour of 80 men for one year, and to produce cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth.” Opportunity cost, comparative advantage, & scarcity ALL contribute to decision-making EXTENSION ACTIVITY: PROM PLANNING Your class has been engaged in various fund-raising projects during the past several years, and you now have a total of $9,635 to spend on a big bash - your last school dance. You may not spend more than this amount on the dance, but you do not have to spend all of it on the dance. Any money "left over" can be used for a class project, designed to help your school or community. You have decided that there are three categories of expenditures for the dance. 1) hiring a band 2) renting a place to hold the dance 3) providing refreshments and decorations