Economics:

1. Economics: An Introduction.

2. Essential Standards • The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs and trade-offs for individuals, businesses and governments. • The student will define scarcity as a basic condition which exists when limited productive resources exceed unlimited wants. • The student will define opportunity coast as the next best alternative given up when individuals, businesses and governments confront scarcity by making choices. • The student will explain that rational decisions occur when the marginal benefit of an action equal or exceed the marginal costs.

3. What is Economics? • Economics is the study of MONEY… • The study of CHOICES… • And the study of how individuals and nations use scarce resources to satisfy their needs and wants.

4. Why is This Class Necessary? • This is Warren Sapp. • He made over $60 million during his career… • He owed child support to five different women… • Owned 240 pairs of Air Jordans… • Had run up $6.7 million in debt… • And had $1,165,35 in his checking account… • When he declared bankruptcy in 2011. • Your future prosperity does not depend on your INCOME. • It depends on your ability to make GOOD DECISIONS. • That is the point of this class.

5. Incentives: The Key to Economics • All of economics rests on this principle…. • Incentive: the hope for a reward or the fear of a punishment. • There are THREE types of incentives… • Positive incentives… • Negative incentives. • A positive incentive is a REWARD… • And a negative incentive is a PUNISHMENT… • And PERVERSE incentives— • Incentives that cause people to do BAD THINGS.

6. Which of the following is an example of a NEGATIVE incentive? iRespond Question Multiple Choice F D4407D0C-D055-F047-9DD4-0EE8CA1F0AA9 A.) the promise of a high-paying job upon graduation. B.) the possibility of a toothache resulting from poor oral hygiene. C.) the promise of making the starting lineup of your school's football team. D.) the satisfaction involved in mastering a mathematics problem. E.)

7. There is No Such Thing as a Free Lunch • Resources are limited, but human desires are UNLIMITED… • This is called SCARCITY… • Scarcity ALWAYS exists. • Because of scarcity, EVERYTHING you do has a cost… • Even if that action seems to be “free”… • What might be a “cost” of taking a walk in the park?

8. OpportunityCost What trade-off is being made in this picture? • Because of scarcity, everybody is forced to make trade-offs…The sacrifice of one thing in order to have another. • The cost of the trade-off is called the opportunity cost—The value of the SECOND BEST option you did not take. • This Sunday you might choose between…church, sleep, visiting family, doing homework, working… • You narrow it down to visiting your grandmother and SLEEP… • And you go back to sleep. • What was your opportunity cost? • Visiting your grandmother. • Was that a good choice? • Maybe…maybe not.

9. Which of the following BEST describes the opportunity cost of eating lunch at McDonald's? iRespond Question Multiple Choice F 7CE0F1ED-A393-3D4C-B969-9A11A6B6EB1A A.) the satisfaction that comes with eating at your favorite restaurant. B.) not eating lunch at Wendy’s. C.) being able to purchase a Happy Meal. D.) spending five dollars. E.)

10. Guns or Butter? • Economists simplify the concept of the trade-off by using this example: • A country that decides to produce more military goods has fewer resources to devote to public goods. • Remember—SCARCITY! • Money that is spent on an aircraft carrier... • Is no longer available to be spent on a school.

11. Why Are You Here? • You could be working RIGHT NOW!!! • But right now, you are making NO MONEY AT ALL!!! • Minimum wage is now $7.25…but you might even get a job—RIGHTNOW—for more than that!!! • Let’s say, $10 an hour… • $10 an hour, 8 hours per day, $80 bucks a day, $400 bucks a week… • This semester lasts for 18 weeks… • What is your opportunity cost for choosing to stay in school?

12. $7,200

13. But Wait! • High school dropouts earn, on average, $910,000 in their lifetime… • Graduates earn $1.2 million… • So, the opportunity cost of dropping out is $290,000. • And those with four-year degrees earn $2.1 million… • So the opportunity cost of not going to college is $900,000. • Those with master’s degrees earn $2.5 million… • And those with professional degrees earn $4.4 million.

14. Essential Standards • The student will illustrate by means of a production possibilities curve the trade-offs between two options. • The student will list a variety of strategies for allocating scarce resources. • The student will define and give examples of productive resources such as land, labor and capital. • The student will explain the role of money and how it facilitates exchange.

15. Production Possibilities Curve • To draw a PPC, an economist begins by deciding which good or service to examine… • For example, farm goods and factory goods. • The curve shows how a 100% focus on one good… • Would result in 0% production of another… • And all points in between.

16. Example of a Production Possibilities Curve

17. Factors of Production • Factors ofProduction—the resources that are used to make all goods and services. There are three: • Land—natural resources used to produce goods and services (coal, water, lumber)… • Labor—the effort a person devotes to a task… • Capital—any human made resource that is used to produce other goods and services. There are two types of capital: …Physical Capital, and… …Human Capital.

18. Types of Capital • PhysicalCapital—Human-made objects that are used to create other goods and services… • Such as—tools, factories…what else? • Human Capital—the knowledge and skills a worker gains through education and experience. • The economy must have both types of capital to grow.

19. Putting the Factors Together: • Entrepreneurs—ambitious leaders who combine land, labor and capital to create and market new goods and services. • They develop new ideas, start businesses, create new industries and are critical for economic growth to occur.