An Economic Way of Thinking
1-1
Define: Economy
Economics
1. Who is Adam Smith?
2. In Wealth of Nations what is Smith’s definition of rich or
poor?
3. In the 18th century what did Smith make a point to say
that people wanted?
4. What do YOU think “rich” and “poor” are?
1-2
Define: Economic Enigmas
Resource
Microeconomics/Macroeconomics
Positive economics
Normative economics
1. Describe “unlimited wants”. What do YOU think of this
principle?
2. If we talk about the workings of the economy as a whole
would we be talking micro or macroeconomics? Give an
example.
3. If we talk about personal finance would we be talking
micro or macroeconomics? Give an example.
4. What is the difference between positive and normative
economics? Give an example statement of each.
5. Find and explain an economic enigma
6. Explain the following enigmas. If you can.
a. Why do people buy water for $2.00/16oz at a
gas station when the station sells gas for
$3.00/gallon?
b. Why are prices $.99 instead of $1.00?
c. Why does your cell phone have thousands of
unused operations?
d. Why is there brail on a drive-up ATM?
e. Why is organic food more expensive than
regular?
f. Why does a printer cost $100.00 and the price
of printer ink is $40.00
Economic Way of Thinking
1-3
Define: Scarcity, Trade-off, Cost-benefit analysis, Incentive,
Cost, Benefit, Marginal cost/benefit
1. List and describe the 7 principles of an economic way
of thinking.
2. Why does scarcity cause tradeoffs?
3. People choose something when the cost is in what
relation to the benefit?
4. According to the thinking-in-the-margin principle how
do people make changes?
5. How are incentives both good and bad- depending on
weather you are a buyer or a seller?
6. How does trade make us better off?
7. What is a market and how does it coordinate trade?
8. What are some consequences if you decided to take a
road trip- intended and possibly unintended
What principle do the following statements deal with?
Explain.
a. John has six shirts and is trying to decide whether to buy
a seventh
b. John doesn’t study for a test and fails. He decides to
start studying for test.
c. David is deciding to volunteer this summer instead of
working for pay.
d. David wants to buy a car but decides he can’t afford the
insurance.
e. You need a pencil for class. A neighbor gives you one
because you will buy him a water at lunch
f. Joe is tired and feels himself dosing-off during class, he
notices the teacher looking at him, and he gets his notes
out and pays attention.
1-4 What Tools Do Economist Use
From Power Point
1. What steps are involved in the scientific method?
2. What was the “natural experiment” that economist used to
measure the economic effects of raising the speed limit?
3. According to the rational-behavior model, how do people
behave? What is it based on?
4. What are the drawbacks to the rational-behavior model?
How do we account for the missing factors?
1. You are a manager of a grocery store. Your store wants to go
to discount cards. How would you use the scientific method?
2. What do graphs really show?
3. What is the difference between correlation and causation?
4. You are a manager of a grocery store . Your store is doing
badly. How can we figure out what is going wrong.