SESSION I (Key Points)
Scarcity
1. Economics is fundamentally about scarcity (not having enough of something to satisfy
one's wants or the wants of society in general).
2. People face scarcities of money, time, space, etc. all the time in their everyday lives.
3. Because of the scarcity of something, it is necessary to allocate or ration the limited amount
of it available.
4. There are many possible allocation or rationing methods that can be and are used.
5. Allocation/rationing methods make a choice given a scarcity, they do not eliminate the
scarcity.
6. Market economies are based on the willingness-and-ability-to-pay allocation/rationing method.
7. Economics investigates when the willingness-and-ability-to pay allocation/rationing method
works well and when other rationing might work better.
A FRAMEWORK FOR TEACHING BASIC ECONOMIC
CONCEPTS with Scope and Sequence Guidelines, K-12
(1995) National Council on Economic Education, New York, NY
Basic Concepts
FUNDAMENTAL ECONOMIC CONCEPTS
1.
2.
3.
4.
5.
6.
Scarcity and Choice
Opportunity Cost and Trade-offs
Productivity
Economic Systems
Economic Institutions and Incentives
Exchange, Money, and Interdependence
MICROECONOMIC CONCEPTS
7.
8.
9.
10.
11.
12.
Markets and Prices
Supply and Demand
Competition and Market Structure
Income Distribution
Market Failures
The Role of Government
MACROECONOMIC CONCEPTS
13.
14.
15.
16.
17.
18.
Gross Domestic Product
Aggregate Supply and Aggregate Demand
Unemployment
Inflation and Deflation
Monetary Policy
Fiscal Policy
INTERNATIONAL ECONOMIC CONCEPTS'
19. Absolute and Comparative Advantage and Barriers to Trade
20. Exchange Rates and the Balance of Payments
21. International Aspects of Growth and Stability
A FRAMEWORK FOR TEACHING BASIC ECONOMIC
CONCEPTS with Scope and Sequence Guidelines, K-12
(1995) National Council on Economic Education, New York, NY
Basic Concepts
FUNDAMENTAL ECONOMIC CONCEPTS
1.
Scarcity and Choice
2.
3.
4.
5.
6.
Opportunity Cost and Trade-offs
Productivity
Economic Systems
Economic Institutions and Incentives
Exchange, Money, and Interdependence
MICROECONOMIC CONCEPTS
7.
8.
9.
10.
11.
12.
Markets and Prices
Supply and Demand
Competition and Market Structure
Income Distribution
Market Failures
The Role of Government
MACROECONOMIC CONCEPTS
13.
14.
15.
16.
17.
18.
Gross Domestic Product
Aggregate Supply and Aggregate Demand
Unemployment
Inflation and Deflation
Monetary Policy
Fiscal Policy
INTERNATIONAL ECONOMIC CONCEPTS
19. Absolute and Comparative Advantage and Barriers to Trade
20. Exchange Rates and the Balance of Payments
21. International Aspects of Growth and Stability
A FRAMEWORK FOR TEACHING BASIC ECONOMIC
CONCEPTS with Scope and Sequence Guidelines, K-12
(1995) National Council on Economic Education, New York, NY
Basic Concepts
FUNDAMENTAL ECONOMIC CONCEPTS
1.
2.
3.
4.
5.
6.
Scarcity and Choice
Opportunity Cost and Trade-offs
Productivity
Economic Systems
Economic Institutions and Incentives
Exchange, Money, and Interdependence
MICROECONOMIC CONCEPTS
7.
8.
9.
10.
11.
12.
Markets and Prices
Supply and Demand
Competition and Market Structure
Income Distribution
Market Failures
The Role of Government
MACROECONOMIC CONCEPTS
13.
14.
15..
16.
17.
18.
Gross Domestic Product
Aggregate Supply and Aggregate Demand
Unemployment
Inflation and Deflation
Monetary Policy
Fiscal Policy
INTERNATIONAL ECONOMIC CONCEPTS
19. Absolute and Comparative Advantage and Barriers to Trade
20. Exchange Rates and the Balance of Payments
21. International Aspects of Growth and Stability
Session 1: Additional Procedural Notes
A. Data Collection
The "Possible Allocation/Rationing Methods" activity in this session collects data used to
construct a value (demand) curve in Session 5. See Step 9 of B below.
B. Possible Allocation/Rationing Methods
1. Have students write down in ONE word what they think describes what economics is
fundamentally about. Have students report their word. (Answers will vary but will likely
include: money, business, investing, resources, choices, etc.)
2. Tell students to think about the word "economize" and ask: "Why do people economize on
something?" (Because there is not enough of it)
3. Explain that economics is fundamentally about scarcity or the condition of not having
enough of something to satisfy what is needed or wanted. The first scarcity most people think of
is not having enough money to buy all the goods and services they want (the basic personal finance
problem), but there are many other things that are scarce such as time to do everything one wants
to do or space in one's closet or room for all their "stuff."
4. Show the class a "Get Out of a Quiz Free" card (or some other item associated with homework
or extra credit points). Ask: "How many of you would like to have this card which allows you to
skip a quiz or have a low quiz score removed?" (Likely most of the class) Explain that you only
have three cards so there is a scarcity of cards—many are wanted and yet only three students can
have one. Because of this, the class needs to come up with a way to decide which three students
will get the cards.
5. Ask the class for suggestions and record these on the board for the class using the general
categories shown on the "Possible Allocation/Rationing Methods" visual (do not show the
visual, let students come up with these on their own) and describe exactly how each would work to
select three students. For example, if someone suggests "by height," write down "Personal
Characteristic" and then underneath write "height." Next explain that everyone could be lined up
along the wall from tallest to shortest and you could select the tallest three students (or the
shortest three students). Ask if there are other personal characteristics that could be used and
students should come up with weight, age, etc. Do the same as other methods are suggested.
For example, if someone suggests "by auction," write down "Willingness and Ability to
Pay" and then explain how each student could secretly write down the maximum they would be
willing and able to pay for a card and then you could give the cards to the three highest bidders. If
someone suggests "a lottery," write down "Random Draw" and then describe how everyone's
name could be placed in a hat and three names could be drawn out. Continue until the students
have come up with ideas that represent most of the methods shown (lead them on as is necessary
6. Have students discuss which of these methods they think should be used to distribute the three
cards. This should lead to a discussion as to how "fair" each of these methods is. Most students
would not view "Willingness and Ability to Pay" as a "fair" method in this case. Thus, although it
is the primary mechanism used to allocate goods and services in a market-based economy, there
may be situations when another method may be better.
7. Distribute or show "Possible Allocation/Rationing Methods" visual and discuss examples.
8. Distribute or show newspaper examples and have student identify what is scarce and which
allocation method being used in each case. ("Rules block...": limited medical resources;
Personal Characteristic—degree of Indian ancestry; "Now listen...": limited space on ark ramp;
Personal Characteristic—alphabetically by name of animal; "Homeless...": shelter beds; Random
Draw, "Why not...": entry into the U.S.; Willingness and Ability to Pay; "Bonus Question...
": entry into medical profession; Performance-based)
9. Distribute a small piece of paper to each student. Explain that since market-based
economies such as the U.S. allocate many goods and services on the basis of willingness and
ability to pay, it will be important to understand better how this method works. Tell each student
is to write down on their piece of paper "the maximum they would be willing and able to pay" for
the card shown earlier. Explain that they should only write down a whole dollar amount (for
easier tabulation and graphing later). Tell them that it is important that they take this exercise as
seriously as possible. So, once they have written down an answer they should ask themselves,
"would I really be willing and able to pay that much?" If not, write a lower number, if so, think
about writing down a higher number.
10. Collect all the pieces of paper and tell the class that they will see their answers later in the
course.
Possible Allocation/Rationing Methods
1. Random Draw
By luck, by lottery, by drawing out of a hat, etc.
Examples: drawing cards for shelter beds, choosing Vietnam War draftees, determining
Powerball, raffle, or door-prize winners
2. Personal Characteristic
By age, by weight or height, by ancestry, alphabetically by name, by need, etc.
Examples: Social Security benefits, government welfare benefits, organ transplants,
choosing starters for a basketball team, determining eligibility for Indian
Health-Services
3. Performance-based
By test score, by 1 OK race results, by quantity of sales, by number of push-ups, etc.
Examples: grades, scholarships, promotions, awards, sport/game winners
4. Willingness and Ability to Pay
By the amount of cash, goods, or services one is willing and able to sacrifice.
Examples: most everything in a market-based economy–pizzas, houses, cars,
toys, college education, personal electronics, etc.
5. First Come, First Served
By who is first in line, first on a list, first to a stop sign, etc.
Examples: goods in the former Soviet Union, an intersection with four-way stop signs,
immigration into the U.S., tickets to a popular concert, table reservations
6. Fiat (Authority)
By authority/whim of the allocator–teacher's pet, parent's favorite, dictator's choice, etc.
Examples: anything under the allocator's control: parents decide how much candy their
kids are allowed to eat, a dictator decides if his country's resources are going
to be used to produce housing or military equipment
7. Voting
By majority rule, by who gets the greatest amount of votes, etc.
Examples: Congress and state legislatures allocating public resources, choosing
prom king and queen
8.
Others
By combining two or more of the above.
Example: a popular concert (must be willing and able to pay the ticket price, but also
first in line to get the tickets)