Transcript Ch 1 Econ Fundamentals 11

ECONOMICS
How can you think like an
Economist?
Adam Smith
 Considered the founder of modern-day
Economics
 Wrote a book called “The Wealth of
Nations,” in which he argued that
competition is the key to a healthy economy
(1776)
 Made a point that people want not only the
basics necessities, but also things that make
life easier, more convenient, and entertain
them.
What is Economics All About?
 Economics- The study of how people
use their limited resources to satisfy
unlimited wants.
 Economy: a system used to manage
limited resources for the production,
distribution, and consumption of goods
and services
Economics is about…
 Studying how people use limited resources
to satisfy unlimited wants (Scarcity)
 Analyzing everyday enigmas (puzzles or
riddles that might be explained through
economic analysis
 Analyzing how economics work and describe
how things are (positive economics)
 Making policy recommendations and advise
how things should be done (normative
economics)
 Teaching better decision making (the
science of decision making)
WIO: Term Economics
 Write the term ECONOMICS vertically along
the left side of a notebook page. Begin each
line with a word that starts with the
appropriate letter.
 Each line must help answer the question,
What is economics all about?
 Include the following terms somewhere in
your acrostic poem: engima, resource,
scarce, science, normative economics, and
positive economics.
7 Principles that Guide an
Economic way of Thinking
 1) Scarcity forces tradeoffs: Limited
resources force people to make choices and
face tradeoffs (exchange of one benefit for
another that is thought to be better) when
they choose.
 2) Cost vs. Benefits: People choose
something when the benefits of doing so
are greater than the costs.
 Cost-Benefit Analysis: compare the costs of an
action with the benefits of that action. If the
benefit outweighs the cost, the action is worth
taking
…CONTINUED
 3) Thinking at the margin: Most of the
decisions made each day involve choices about a
little more or a little less of something.
 4) Incentives matter: People respond to
incentives (any factor that encourages or motivates
a person to do something) in generally predictable
ways.
 5) Trade makes people better off: By focusing
on what we do well and then trading with others,
we will end up with more and better choices than
by trying to do everything for ourselves.
Continued…..
 6) Markets coordinate trade: Markets
usually do better than anyone or
anything else at coordinating
exchanges between buyers and
sellers.
 7) Future consequences count:
Decisions made today have future
(and often unintended) consequences.
Seven Principles
Poster Activity
 In your group, you will be assigned one of the
seven principles of Economic thinking. With your
principle, you need to create a poster that includes
the following:
 Name of your principle
 Symbol that represents your principle
 One-Sentence Summary of your principle
 One example of the principle
 Your poster needs to be neat, with legible print that
is large enough to read from a distance.