1 DO NOW!!! What words or ideas come to mind when you think of economics? What are you most interested in learning about this year?

2 DO NOW!!! What would you buy if I gave you $100?

3 WHAT IS ECONOMICS???

4 Basics of Economics The basic question of economics:How do we satisfy unlimited and competing needs and wants with limited resources? Scarcity: Unlimited wants but limited resources

5 Assumptions of EconomicsWhat do we assume in econ.? Wants are unlimited, resources are limited (Scarcity) Nothing is given for free People are rational (they don’t make mistakes or regret) People, policies are predictable

6 Let’s check… Questions: Why is air not considered in economics?What is an example of a “free” thing? Why is that thing not truly free?

7 Positive vs. Normative Has value judgments/emotionsNormative statements Has value judgments/emotions - Watch for ‘should’ or ‘must’ “The gov’t should help the poor.” Positive statements facts only….“when the price rises, fewer people buy.”

8 2 types of economies Command/Centrally planned - Socialism / Communism- gov’t control + ownership Market Economy (Laissez-faire) - private property + Competition - Free Enterprise - consumers/producers choose * US is a mixed economy

9 4 Factors of Prod. (CELL) Land- land and natural resources (rent, trees…) Labor: People (me, policemen) Capital: Man made anything Entrepreneur: business starter *FOP also called ‘Resources’, inputs  Why is money NOT a resource?

10 Marginal Analysis Marginal:”Additional” = Change in totalUtility: economic happiness  can express in Dollars! Marginal benefit/utility: happiness from one more unit Marginal Cost: cost of producing 1 more unit

11 Marginal Analysis What’s the marginal utility/benefit of 1 hour with a gf/bf after not seeing each other for a while? - What about the next hour? - What is the Marginal cost of the first hour? What is the MC of 10th hour? How about the 20th?

12 Circular Flow Model Firms Households Markets for Goods & ServicesRevenue Markets for Goods & Services Spending G & S sold G & S bought Firms Households Wages, rent, profit Factors of production Income Labor, land, capital In this diagram, the green arrows represent flows of income/payments. The red arrows represent flows of goods & services (including services of the factors of production in the lower half of the diagram). To keep the graph simple, we have omitted the government, financial system, and foreign sector, as discussed on the next slide. You may wish to change the order in which the elements appear. To do so, look for “Custom Animation” in your version of PowerPoint. Markets for Factors of Production THINKING LIKE AN ECONOMIST 12

13 Practice circular flowWho are buyers/sellers in the product market? Name three transaction you or your family has made in the Product market this week . Give an example of a resource owner. Name one transaction you or your family has made in the resource market this past week. Classify each of the following as resource or product market transactions: I buy a baseball glove for my son Harker hires me to teach economics A self-employed lawyer buys a new briefcase