Introduction to

Economics

1. What is Economics?

2. Economic Systems

The Economy?

Are you the economy?

Economy, is that you?

DAY 1: What is

Economics?

Discuss: What comes to your mind when you hear the term “economics”???

Definition: The study of how people seek to satisfy their needs and wants by making choices

Microeconomics: The study of the economic behavior & decision making of individuals, families and businesses

Macroeconomics: The study of the behavior & decision making of entire economies

WANTS Vs. NEEDS

& GOODS Vs. SERVICES Although people's wants and needs are unlimited, the

resources to satisfy these wants and needs are limited.

Describe the following:

Want =

Item we desire not essential to survival

Need =

Necessary for survival (food, air)

Goods =

Physical objects such as clothes

Services =

Action one performs for another (for example, a mechanic provides service for your car to run better)

Economics includes the concepts of

Scarcity and the Factors of Production

Scarcity

Limited quantities of resources to meet unlimited wants

• Economics is about solving the problem of scarcity

Factors of production (resources)

Land, labor and capital: the 3 groups of resources that are used to make all goods and services

IMPORTANT ECONOMIC

“COST” DEFINITIONS (in

your reading!): • Monetary Costs All costs paid for with money

• Non-monetary Cost/Search Cost the value of the time, energy, etc. spent trying to find something

• Transaction Cost additional fees (like shipping or ATM fees)

• Sunk Cost money or time already spent on something = irretrievable

• The Law of Supply tendency of suppliers to offer more of a good at a higher price to increase profit

• The Law of Demand economic law that states that consumers buy more of a good when its price decreases and less when its price increases

• Marginal Cost the cost of consuming or producing one more of something

• Marginal Benefit the benefit of consuming or producing one more of something

Economics includes a focus

on: Opportunity Cost

All human decisions involve trade-offs

Opportunity cost – the most highly valued sacrificed alternative; the “next-best” choice EXAMPLE = Water or soda? If you choose water, soda is the

opportunity cost.

“Choosing is Refusing” Sleep in late or wake up early for a ski trip?

Sleep in late or wake up early to eat your breakfast?

Sleep in late or wake up early to study for a test?

• Thinking at the margin: when one decides how much more or less to do

Can compare costs and benefits in “units” rather than the whole

Discuss each of the following:

What is the opportunity cost of playing video games?

What is the opportunity cost of ditching school?

What is the opportunity cost of picking your nose in public?

What is the opportunity cost of going to college?

What is the opportunity cost of saving all of your money?

What is the opportunity cost of working on a school project over the weekend?

If you sniff a red marker you lose 50 brain cells. If you sniff the gray marker you lose 5 brain cells. The red smells like cherry and the gray smells like charcoal. What is the opportunity cost of sniffing one marker over the other?

DAY 2: Economic Systems

Warm Up: What do you know about each

of the following?

Capitalist economy

Command economy

Socialist economy

Comparing

economic “ISMs”

Answering the Three

Economic Questions The three basic economic questions societies

ask are: 1. What goods and services should be produced?

2. How should these goods and services be produced?

3. Who consumes these goods and services?

An economic system = the way a society (or government!) decides to answer these three economic questions.

The Free Market

A self-regulating economic system

powered by individuals acting in own

self-interest

factors of production (Land, labor and

capital) = privately owned

individuals decide how to answer the

three economic questions

Capitalism: Origin

Adam Smith wrote a book in 1776 entitled

The Wealth of Nations

outlined the basic idea of laissez-faire

economics (“to let alone”);

government = keep its hands off the

economy to ensure free competition in

the marketplace

Capitalism: Main characteristics

private ownership, control of property and economic resources

individual incentive

competition among businesses

freedom of choice/free market (buyers and sellers are free to make unlimited economic decisions in the marketplace)

possibility of profits…no nation has a pure capitalist system, but the US is the closest

Economic Decisions

in Capitalism: • (1) What and how much to produce?: determined

by actions of buyers and sellers…not by the

government

• How should good and services be produced?:

sellers compete with one another to produce

goods and service at reasonable prices; workers

try to sell their skills and labor for the best wages

• Who gets the goods and services that are

produced?: consumers compete with one another

to buy what they want and need

PLAY CAPITALISM MONOPOLY!!!

Day 3: Socialism Origin

Industrial Revolution in Europe in the 1800’s led to a rejection of capitalism…

Remember your US History class? Problems that arose during the IR in the US? The same issues faced developing European nations…

Socialism: Econ Decisions

• Main characteristics: On behalf of the

people, the government…

owns the means of production

determines the use of resources

distributes the products and wages

provides social services

• Many countries today have a system of

Democratic Socialism (Spain, Canada,

Italy, Sweden, ETC)

Economic Decisions: • (1) What and how much to produce?:

society controls these decisions through the government

• (2) How should goods and services be produced?: Public ownership of most land, of factories, and of other means of production with government regulation/ownership

• (3) Who gets the goods and services that are produced?: distribution of wealth and economic opportunity equally among people

Modern Economies

Most economic systems in the world today

are mixed economies

A combination of:

• government involvement (SOCIALISM) and

• free markets (CAPITALISM)

PLAY MIXED-MARKET/MODERN

SOCIALIST MONOPOLY!!!

Day 4: Origin of Command

Economy • Origin: Karl Marx wrote The Communist

Manifesto (1848) and then Das Capital (1867);

• bourgeoisie (own the means of production) =

oppressors

• proletariat (workers who produce the goods) =

oppressed & should rise up in revolution and

take over the means of production

Centrally-Planned/Command

Economies

Central government controls

factors of production

answers the 3 basic economic questions for

all of society

Extreme form of Socialism = Communism

Communism

Main characteristics “Command Economy”

Government decides how much to produce, what to produce and how to distribute goods and services

The govt owns the land, natural resources, industry, banks and transportation facilities

The govt controls all mass communications including newspapers, magazines, and broadcast stations.

People have limited economic and political freedom: cannot choose own careers, limited to buying goods the government chooses to produce, citizens have little influence on government’s economic decisions with their votes, because one party chooses all the candidates

Command Econ: Economic

Decisions • (1) What and how much to produce?: government

makes all decisions

• (2) How should goods and services be produced?:

government makes all decisions

• (3) Who gets the goods and services that are

produced?: people can use their money to buy

whatever they want, but they are limited to

whatever the government decides to produce.

PLAY Command Economy MONOPOLY!!!

GROUP ACTIVITY:

Your group will be assigned an economic system.

Create a skit in which you convince the class that your system is superior to all others…all members must participate in the skit

Your main focus should be on promoting the positive aspects of your economic system. You might also consider portraying the negative aspects of the other two economic systems.

Be creative! How convincing you are could mean extra credit points for your group!

Directions:

1. As a group, brainstorm ideas for how to portray your system & then decide on one scenario.

2. Assign the jobs your group members need to complete by the end of task in order to make this an impressive/convincing skit. The list might be something like this

1. Write a script (will be turned in)

2. Research additional info in the Econ and/or Gov books

3. Create props (required)

4. Create slogans & posters (will be turned in)

Econ System Requirements

Poster with slogan & visuals (10pts)

Script (10pts)

Props (10pts)

Accurate coverage of assigned system in

your skit (20pts)