1 / 12

Economics

Economics. The Seven Principles of Economics. Warm Up: Think Like an Economist. 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 ?

lindley
Download Presentation

Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economics The Seven Principles of Economics

  2. Warm Up: Think Like an Economist • 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? • If you were opening a new business, would you select a location closer to or farther away from a business that sold similar or even identical product? Why? • 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?

  3. Introduction • Economics IS more than just money, taxes, banking, and trade • Economists have developed principles that represent a specific way of thinking • The number of principles may change depending on the economist, but the overall message is the same

  4. Principle #1: Scarcity Forces Tradeoffs • Remember the definition of “Economics” • Four Words: What are they? (L R, U W) • Scarcity • the condition that results because people have limited resources but unlimited wants • Must make choices • Every choice involves tradeoffs • No such thing as a free lunch • What choices and tradeoffs do you think about or make?

  5. Principle #2: Costs vs. Benefits • Principle #1 makes us choose, but how do we decide? • Economists assume that people make choices based on estimated costs and benefits • Cost v. Benefit analysis • Lists • Weighted calculations • What are the costs v. benefits of sleeping one hour later each day?

  6. Principle #3: Thinking at the Margin • Margin is the border or outer edge • “A little more” or “a little less” rather than all or nothing • Usually decisions are not a wholesale change • Marginal cost: What you give up to add “one unit” to an activity • Marginal benefit: What you gain by adding one more unit • Example: Studying. Should you study 2 hours for Econ, or 3?

  7. Principle #4: Incentives Matter • Costs and benefits influence our behavior • They are INCENTIVES • People respond to them • Can be positive or negative • What are some examples you can think of?

  8. Principle #5: Trade Makes People Better Off • Why don’t we all make our own clothes, or grow our own food? • Adam Smith: none of us is equally skilled at everything • Concentrate on what we do best, and trade for the rest! • Examples?

  9. Principle #6: Markets Direct Trade • What is a market to you? • Economists take a larger view • A market is any arrangement that brings buyers and sellers together to do business • Can exist anywhere • When markets operate freely, both sides will trade until each is satisfied (theory) • Result is efficient market • Adam Smith: Invisible Hand

  10. Principle #7: Future Consequences Count • Do people think long term or short term? • Generally shortsighted; they look for immediate benefits and costs • Decisions always have long term consequences, though • Example: 1968 VT law banned road side billboards; result---people built large sculptures and statues to get attention (19 ft Genie, giant squirrel) • Unintended Consequences

  11. Conclusion • Now you know the principles, it is time to put them into action by analyzing some data on real world situations. • But first… • http://www.youtube.com/watch?v=VVp8UGjECt4

  12. Conclusion • You will now take on the role of economists • you will practice analyzing enigmas and applying the principles of economic thinking to explain each enigma in groups. • 3 enigmas around the room. • Use the handouts provided to complete your group work. • EACH STUDENT MUST TURN IN THEIR OWN HANDOUT!

More Related