AP Economics
Ms. Sara Kirsch
Do Now
 What is the definition of rational?
Rational
 Based on or in accordance with reason or
logic
 Self interested – maximize satisfaction
 Won’t do something that hurts you
Economic Terminology
 Utility = Satisfaction
 Marginal = Additional
 Allocate = Distribute
With a Partner…
1. Define scarcity
2. Define Economics
3. Identify the relationship between scarcity and choices
4. Explain how Macroeconomics is different than Micro
5. Explain the difference between positive and normative
economics
6. Identify the 5 main assumptions of Economics
7. Give an example of marginal analysis
8. Name 10 Disney movies
Analyzing Choices
 Given the following assumptions, make a
rational choice in your own self-interest (hold
everything else constant)…
Analyzing Choices
1. You want to visit your friend for a week
2. You work every weekday earning $100 per
day
3. You have three flights to choose from:
Thursday Night Flight = $275
Friday Early Morning Flight = $300
Friday Night Flight = $325
Analyzing Choices
 Which flight should you choose? Why?
Trade-offs and Opportunity Cost
 ALL decisions involves trade-offs.
 Trade-offs are all the alternatives that we give
up whenever we choose one course of action
over others.
 Ex. Studying or watching a movie.
Opportunity Cost
 The most desirable alternative given up as a
result of a decision is known as opportunity
cost.
 OC
 What are trade-offs of deciding to go to
college?
 What is the opportunity cost of going to
college?
Question #1
 51. In economics, the pleasure, happiness, or
satisfaction received from a product is called:
 A) marginal cost
 B) rational outcome
 C) status fulfillment
 D) utility
 E) efficiency
Question #2
 52. According to economists, ‘self-interest’:
 A) is more characteristic of men than of women.
 B) has the same meaning as selfishness.
 C) is a reality that underlies economic behavior.
 D) is usually self-defeating, resulting in loss to
society
 E) is nonexistent in communism.

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Question #3
 53. The study of economics is primarily concerned
with:
A) keeping private businesses from losing money.
B) demonstrating that capitalistic economies are
superior to socialistic economies.
C) choices that are made in seeking to use scarce
resources efficiently.
D) determining the most equitable distribution of
society's output.
Question #4
 54. As a consumer, you decide to go to a movie:
A) if the marginal cost of the movie exceeds its
marginal benefit.
B) if the marginal benefit of the movie exceeds its
marginal cost.
C) if your income will allow you to buy a ticket.
D) because all movies are enjoyable.
Question #5
 55. Macroeconomics can best be described
as the:
A) analysis of how a consumer tries to spend
income.
B) study of the aggregates of the economy or
the economy as a whole.
C) analysis of how firms attempt to maximize
their profits.
D) study of how supply and demand determine
prices in individual markets
Question #6
 56. A normative statement is one that:
A) is based on the law of averages.
B) applies only to microeconomics.
C) applies only to macroeconomics.
D) is based on value judgments.
E) is objective and is based on facts.
Homework
 Section 1 Outline in Krugman – Basic
Economic Concepts
 Materials for Class due Monday
 Summer HW – PRINTED – due Sept. 16th