What is Economics?

1. What is Economics?

2. How do these questions relate to economics? • How badly do I need a winter coat? • Should we rent or buy a house? • Who will use the family car tonight? • Should I go to university next year or take a year off to get a job? • Should I cook supper or order take out? • Should I party tonight or study for my test?

3. What do you know about economics?

4. Economics can be defined as the social science that deals with production, distribution, and the use of goods, money, natural resources, and services. • As much as this definition seems right we are missing an important factor…

5. Xenophon (430 BC- 354 BC) • Free citizen-soldier from Athens who studies under Socrates. Was exiled from Athens from supporting the Spartans. He theorized about private estate management and wealth. He wrote Oeconomicus which is made up of two words that loosely translates into “to manage” and “house”. • Xenophon recognized the connection between the success of agriculture and the arts. • He also spoke of enemies as a source of wealth.

6. Xenophon recognized that in order to maintain a successful farm he needed laborers that were eager and obedient. • If labourers were scarce his crop yields would decline and so would his wealth.

7. Scarcity • The concept of scarcity is what drives the study of economics and the very idea of what an economy is. • Scarcity is “an insufficient amount or supply.” • We can revamp our definition of economics to simply state; economics is the study of the way we make decisions about the use of scarce resources.

8. When considering modern economies we must understand that nearly everything is scarce to some degree, including air, sunlight, even time!

9. Resources • When we look at limited resources we need to classify them into three categories: • Land - minerals, animals, vegetation, water • Labour– population made of Canadians and immigrants • Capital - manufactured items used to produce goods and services

10. Discussion • In small groups pick a resource listed below and discuss how its scarcity may affect us here in New Brunswick. Be prepare to share your thoughts with the class. • Fresh Water • Oil • Trade Workers • Military • Our Climate

11. Water: rare? Abundance, fresh water is an issue as many countries are struggling to maintain source Oil: a need to run daily life, jobs are affected when prices increase/decrease Trade Workers: moving out west, more expensive here b/c lack of abundance and competition Military: brings $ into the province, may have neg impact on medicare, PTSD… Climate: many seasonal jobs, large snow bird population, min tourists,

12. As mentioned earlier Xenophon wrote about how “good estate managers” can benefit from one’s enemies. • Can you think of any situation where a benefit can be gained from an enemy? • Discuss this idea with your classmates.

13. 9/11 • On Sept. 11th , 2001 the World Trade Center in NYC was struck by two plane, killing an estimate 3000 people and bringing the US to it’s knees politically, militarily, socially and economically. • The WTC was a symbol of American strength and power and therefore a target for terrorists that sought to shake the US and cause as much fear as possible

14. Stock markets around the world experienced a sharp decline in investor confidence and its recovery has been slow and fragile. Even today the markets have yet to truly bounce back and the US spending on military has led to other internal problems. Ex. Americans spend an additional $600 a year for mortgage payments to cover additional costs by the military. The $341 billion spent could have been used for infrastructure and investments that would have improved the American economy for its citizens.

17. Questions to Consider • What was the symbolic significance of a successful terrorist attack on the WTC? • Explain the economic significance of the changes in stock market prices illustrated in the previous image. • The short-term consequences of the attack appear most significant. How could you contradict this statement? Back up your thoughts.

18. Attack on what it means to be American, shook confidence in USA. They are a global military presence, WTC served as a symbol of democracy, trade, power, capitalism, • Lack of faith in US economy, $ being spent just to kick start the economy • Still feeling impact today, travel is harder, viewed differently

19. A Scarce Resource? 1. Money spent on cleaning up Canada’s lakes to ensure that Canadians have an adequate supply of fresh water could have been spent on other projects such as new roads, schools, or hospitals. 2. Canada’s tourism industry relies heavily on an abundant supply of fresh water especially for recreational water sports and fishing. Agriculture and commercial fishing are also heavily dependent on water. Pulp and paper mills rely on rivers to get the logs to the mill.

20. Direct Costs/Opportunity Costs • The process of decision making involves costs, which is divided into two groups: 1. Direct costs are the out-of-pocket expenses that are required to do something. 2. Opportunity costs represent the value of the best forgone alternative in the decision to use a resource.

21. For example the decision to go to school has direct costs such as the tuition fees and costs of books. • The opportunity cost of going to school is the foregone income that could have been earned while working.

22. Direct costs also include: travel expenses while at school, living expenses, food,… • Opportunity costs are often related to sacrifices you have to make. If you have $8000 in the bank, take it out to buy a car, however, they op cost is $400 (5% interest per year) , this is lost because you made a purchase and did not save the interest. Total cost of the car is $8400

23. If a land developer decides to build on good agricultural land then the opportunity cost would include the produce that could have been grown on that land.

24. Opportunity cost is defined as the value of the best possible alternative that is sacrificed when resources are allocated to a specific use. • Here’s a question: Would the opp. costs for attending university differ according to an individuals age? Program selected?

25. Standard of living refers to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area