CHECK IN QUESTION:What do you think Economics is? How would
you define it? (If you’re not sure, list any words that come to
mind when you hear “economics.”)
REMINDERS:• Core 1 due date moved again…FRIDAY, APRIL 25th!!!
• Test on TUESDAY, APRIL 22nd!!!
THINK – PAIR - SHARERespond to each question. Provide a thorough explanation
for each decision. 1. If you could choose between two nearly identical
products—one that is free and one that you have to pay for—which would you choose? Why?
2. If you were opening a new business, would you select a location closer to or farther away from a business that sold a similar or even identical product? Why?
3. If you could make a small change in your daily routine that would save you time and money, would you make the change? Why or why not?
You’re already thinking like an economist and you didn’t even know
it!
Objective:Economics, 7 Principles, Enigmas
INTRO TO ECONOMICS
CHECK IN QUESTION:What do you think Economics is? How would
you define it? (If you’re not sure, list any words that come to
mind when you hear “economics.”)
ECONOMICS
• Depends on the economist and how they are viewing a particular situation.
ECONOMICS• Analyzing how people use their scarce
resources to satisfy their unlimited wants• Studying how people make choices (science of
decision making)• Applying positive economics (how the
economy actually works) and normative economics (how the economy ought to work)
• Explaining everyday mysteries and enigmas
“By necessaries I understand, not only the commodities which are indispensably necessary for the support of life,
but whatever the custom of the country renders it indecent for creditable people, even of the lowest order,
to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. ...But in the present
times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public
without a linen shirt ... Custom, in the same manner, has rendered leather shoes a necessary of life in England. The
poorest creditable person of either sex would be ashamed to appear in public without them. ... Under necessaries, therefore, I comprehend, not only those
things which nature, but those things which the established rules of decency have rendered necessary to
the lowest rank of people.” – Adam Smith, Wealth of Nations
ECONOMICS• Analyzing how people use their scarce
resources to satisfy their unlimited wants• Studying how people make choices (science of
decision making)• Applying positive economics (how the
economy actually works) and normative economics (how the economy ought to work)
• Explaining everyday mysteries and enigmas
THE TOOLS OF THE TRADE• Scientific Method, of course!
1. Ask question2. Research3. Hypothesis4. Conduct study and collect data5. Analyze data6. Evaluate Hypothesis
THINKING LIKE AN ECONOMIST
• 7 Principles of Economics– Explains trends on both large and small scale– Macro / Micro
• For each of the following read the definition and consider a real world situation that you can explain to the class.
1 SCARCITY FORCES TRADEOFFS• Scarcity: condition that results because people
have limited resources but unlimited wants• Tradeoff: exchange one benefit or advantage
for another that is thought to be better• Limited resources force people to make
choices and face tradeoffs when they choose. • No-free-lunch-principle
2 COST VS. BENEFITS
• People choose something when the benefits of doing so are greater than the costs.
• Benefits: gain something in terms of money, time, experience, etc.
• Cost-benefit analysis– Formally list costs and benefits
COSTS BENEFITSNo time for a good breakfast Pleasure of sleeping in longer
No long morning shower Lower water bill
No study time for tests before school May do better on tests if well rested
Less time to dress Less time to worry about what to wear
More likely to be late for class Less likely to fall asleep in class
SLEEPING ONE HOUR LATER…
3THINKING AT THE MARGIN
• Most of the decisions made each day involve choices about a little more or a little less of something.
• Marginal Cost: What you give up to add one more unit to an activity.
• Marginal Benefit: What you gain by adding one more unit.
4 INCENTIVES MATTER
• Motivates a person to take a particular action.• People respond to incentives in generally
predictable ways.
5 TRADE MAKES PEOPLE BETTER OFF
• By focusing on what we do well and then trading with others, we will end up with more and better choices than by trying to do everything for ourselves.
6 MARKETS COORDINATE TRADE
• Markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers.
• Market: any arrangement that brings buyers and
sellers together to do business with one another.
• Invisible hand: individual’s pursuit of self-interest can promote the well-being of society as a whole.
7 FUTURE CONSEQUENCES COUNT
• Decisions made today have future (and often unintended) consequences.
ECONOMIC ENIGMAS
• Enigma: A puzzle that seems to defy common sense
• Economic analysis can explain these crazy things…– Why does movie theatre popcorn cost more than
grocery store popcorn???– Why do store sell things for $7.99 and not $8???
ENIGMAS• Complete the worksheet with accompanying
visuals in small groups.
• TALK and HELP each other
