Transcript September 3, 2013 US II CP 2

September 4, 2014
AP Economics
1. Attendance
2. Notes: Introduction to Economics
3. Informal Quiz: Do You Think Like an
Economist?
Economics Introduction
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T.I.N.S.T.A.A.F.L.
“There is no such thing as a free lunch”
Every action costs someone time, energy, money…AND…
The opportunity to do something else instead.
So the true cost of a decision is measured in
forgone alternatives rather than in dollars.
Economics defined:
The study of how individuals, institutions, and
society make the best choices under conditions
of scarcity.
Limited goods, services, land, equipment, labor,
and talent.
Economics Introduction
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People make decisions on what they believe is important to them based
on costs, incentives, and happiness.
Subjective Value (Everything has a cost; People choose for good
reasons to them)
Incentives matter
Success of capitalism (market economy) and failure of communism
(command economy) is prime example.
People gain from voluntary trade: that is they believe the trade has
made them better off (response to incentives)
Economic thinking is marginal (extra, one-more) thinking (evaluate
whether the marginal benefit of one more unit of something is greater
than the marginal cost.)
The value of a good or service is affected by people’s choices (This is
why trading is so important.)
Economic Actions create secondary effects.
This is all the “Economic Way of Thinking” 
Production Possibilities Curves
• Are we good with opportunity cost, scarcity, incentives,
and marginal cost/benefit?
• Society has unlimited wants, but…
• Resources are limited (scarce)
• 4 categories of resources:
1. Land
2. Labor
3. Capital
4. Entrepreneurship
• Society must decide what combination of goods/services to
produce.
• The cost of choosing one and giving up the other?
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• The PPC: Illustrates Scarcity, Choice, Opportunity Cost