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WORDS OF THE DAY:
DEFINE THESE TERMS

Economy

Economics

Positive economics

Normative economics

Goods/services

When you finish the WOD’s, complete the Anticipation Guide—
left side ONLY.
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Essential Questions:
How do economists
explain their world?
Why can’t you always
get what you want?
The 7 Principles of
Economic Thinking
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WORDS OF THE DAY:
DEFINE THESE TERMS

Scarcity

Choice* (use your device/dictionary)

Tradeoff

Incentive

Cost-Benefit Analysis
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The 7 Principles of Economic
Thinking
1.
Scarcity Forces Trade-offs
2.
Cost vs. Benefits
3.
Thinking At the Margin
4.
People Respond to Incentives
5.
Trade Makes People Better Off
6.
Markets Coordinate to Trade
7.
Future Consequences Count
PRINCIPLE #1
Scarcity Forces Tradeoffs
… People
but Resources
have
Unlimited
are Limited
Wants…
Food
Land
Clothing
Soil
Shelter
Minerals
Schools
Fuels
Hospitals
People
Cars
Money
Transportation
Technology
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Scarcity Forces Tradeoffs
https://www.youtube.co
m/watch?v=yReZ4xdg5
bw
Scarcity Forces Tradeoffs
PRINCIPLE #2
Costs vs. Benefits
Costs vs. Benefits
Costs vs. Benefits
http://yadayadayadaecon.c
om/clip/7/
PRINCIPLE #3
Thinking at the Margin
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 “Thinking
at the Margin” = What is the
benefit of adding ONE more?
 T-shirts
on sale for $10 each – at a
certain point adding ONE more t-shirt is
not worth it anymore.
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Thinking at the Margin
Stop @ 1:15
http://www.youtube.com/watch?v=Ml8_IQ3Cnrs
PRINCIPLE #4
People Respond to Incentives
-Incentives – anything to change
peoples’ behavior. (sale, detention)
Incentives can be …
MOTIVATING
DETERRING
People Respond to Incentives
Incentives Video:
https://www.youtube.com/watch?v=8s4qTifYWe4&index=2&li
st=PLAC4588289DAE0883
PRINCIPLE #5
Trade Makes People Better Off
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In
most economies, trade is
VOLUNTARY.
Parties
only trade if believe it is
in best interest.
McDonald’s wants your money,
you want their food – trade helps
you both.—it’s a “win, win”
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Trade Makes People Better Off
https://www.youtube.com/watch?v=ibvFAw8UckU
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PRINCIPLE #6
Markets Coordinate to Trade
Parties
that trade want to make it as
simple as possible.
Examples:
Many
stores in one location at a
mall
Many brands of food sold in the
same grocery store.
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Markets Coordinate to Trade
https://www.youtube.com/wat
ch?v=h7oq26R6Kak
PRINCIPLE #7
Future Consequences Count
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Economists
always think
about the future
This
“If
is the “…it depends…”
we raise taxes, what will be
the effect?”
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PRINCIPLE #7
Future Consequences Count
Future
Consequences
Count video:
https://www.youtube.com/w
atch?v=F3H1_hJfmwA