+ words of the day: define these terms economy economics positive economics normative economics...
TRANSCRIPT
+WORDS OF THE DAY:DEFINE THESE TERMS
Economy
Economics
Positive economics
Normative economics
Goods/services
When you finish the WOD’s, complete the Anticipation Guide—left side ONLY.
+
The 7 Principles of Economic Thinking
Essential Questions:
How do economists explain their world?
Why can’t you always get what you
want?
+WORDS OF THE DAY:DEFINE THESE TERMS
Scarcity
Choice* (use your device/dictionary)
Tradeoff
Incentive
Cost-Benefit Analysis
+The 7 Principles of Economic Thinking
1. Scarcity Forces Trade-offs
2. Cost vs. Benefits
3. Thinking At the Margin
4. People Respond to Incentives
5. Trade Makes People Better Off
6. Markets Coordinate to Trade
7. Future Consequences Count
PRINCIPLE #1Scarcity Forces
TradeoffsThe inability to satisfy all wants at the same time;
the NEEDS are greater than the RESOURCES
SCARCITY
… but Resources are Limited
People have Unlimited Wants…
LandSoil
MineralsFuels
PeopleMoney
Technology
FoodClothingShelterSchools
HospitalsCars
Transportation
+
SCARCITY forces us to choose which needs and wants to satisfy with available resources. There is no such thing as a “free lunch.”
Scarcity Forces Tradeoffs
https://www.youtube.com/watch?v=yReZ4xdg5bw
Scarcity Forces Tradeoffs
In other words, a TRADEOFF is your choice to come to school today, knowing you are giving
up sleep.
Time is a limited resource (even if you are a billionaire, you still only have 24 hours in a
day!)
By choosing to spend 8 hours in school today, you are giving up the 8 hours you would have spent sleeping if you had not chosen to come
today.
GOOD CHOICE, BTW
PRINCIPLE #2Costs vs. Benefits
As economists, we assume that choices are made based on expected
costs and benefits
Costs vs. Benefits
When people weigh the costs (money, time, effort, energy, some
other sacrifice) against the perceived gain (money, time, experience, other
improvement),this is known as a
COST-BENEFITS ANALYSIS
Every choice has a COST.
Think About It…
When you chose to come to school, what was your cost?
And if you had chosen to stay home and sleep…?
Costs vs. Benefits
What’s Jerry’s COST-BENEFITS ANALYSIS ?
http://yadayadayadaecon.com/clip/7
/
+ PRINCIPLE #3Thinking at the
Margin
“Thinking at the Margin” = What is the benefit of adding ONE more?
T-shirts on sale for $10 each – at a certain point adding ONE more t-shirt is not worth it anymore.
+ Thinking at the Margin
Stop @ 1:15 http://www.youtube.com/watch?v=Ml8_IQ3Cnrs
PRINCIPLE #4People Respond to
Incentives
-Incentives – anything to change peoples’ behavior. (sale, detention)
Incentives can be …MOTIVATING DETERRING
People Respond to Incentives
Incentives Video:https://www.youtube.com/watch?v=8s4qTifYWe4&index=2&list=PLAC4588289DAE0883
+ PRINCIPLE #5Trade Makes People Better
Off
In most economies, trade is VOLUNTARY.
Parties only trade if believe it is in best interest.
McDonald’s wants your money, you want their food – trade helps you both.—it’s a “win, win”
+ Trade Makes People Better Off
https://www.youtube.com/watch?v=ibvFAw8UckU
+ PRINCIPLE #6Markets Coordinate to
Trade
Parties that trade want to make it as simple as possible.
Examples:Many stores in one location at a mall
Many brands of food sold in the same grocery store.
+ Markets Coordinate to Trade
https://www.youtube.com/watch?v=h7oq26R6Kak
+ PRINCIPLE #7Future Consequences
Count
Economists always think about the future
This is the “…it depends…”
“If we raise taxes, what will be the effect?”
+ PRINCIPLE #7Future Consequences
Count
Future Consequences Count video:
https://www.youtube.com/watch?v=F3H1_hJfmwA