Economics Unit I: Intro to Econ
Unit 2: Microeconomics – role of individual
players in the economy
Unit 3: study of behavior of the economy as a
whole
Unit 4: Personal Finance
Opening Activity
1. Name 3 things that you want but don’t need
and the highest price you would be willing to
pay for them at this exact moment.
The Basics
-Economics is the study of how people choose
to use scarce resources to satisfy their wants
and needs
The Basics
• Made necessary by the existence of scarcity
– World has limited resources
– People have unlimited wants
The Basics
• Economies are divided into
producers and consumers
– Producers make things
– Consumers buy things
• Economies can produce goods
or services
– Goods: physical items
– Services: work performed
The Basics
• Economies decide what to
produce based on the
Factors of production
– Land: resources, space
– Labor: workers
– Capital: resources
made/used to produce
goods/services
– Entrepreneurship: ideas,
vision
• Balance of 4 factors to
maximize efficiency
Ex. Coffee
• Land: farms, water, oil to power machinery
• Labor: workers who plant, pick, process, package
coffee
• Capital: farm equipment, processing factories, coffee
roasters, packaging plant
• Entrepreneurship: corporate leaders of company,
investors in company
Ex. Insurance
• Land: space in U.S. for corporate
offices, space in developing
countries for call centers
• Labor: insurance agents, claims
officers, etc.
• Capital: phones, computers, call
centers, office buildings, etc.
• Entrepreneurship: marketing,
business managers, CEO, etc.
WEEKLY APPLICATIONS
• Economics involves lots of diagramming,
illustrating, etc. and so every week you will
turn in “Weekly Applications” that will
contain the exercises we did in class for
the week. If you MISS an application, they
are always available on the notes on the
website.
Application 1:
• Choose a good or service and then describe
how the 4 factors of production apply to the
creation of that product.
Opening Activity
South Sudan is a new country and they have to
establish their economy. They have fertile soil and are
mineral rich, so they will probably attempt to have an
economy focused mostly on agriculture and mining.
1. Will South Sudan have a goods or service economy if
they pursue this route?
2. It’s 10 years down the road and South Sudan has
begun to invest heavily in their education system.
How does this change the factors of production for
their economy? Which factors in particular does it
change?
Economic Choice
• Incentives: additional benefits
• Utility: usefulness, essential benefits
• Consumers weigh costs and benefits
– Economize: make decisions according to best
combo of costs and benefits
Economic Choice
• Every economic choice you make has costs
• Cost = a negative consequence
• Opportunity costs: the things you give up
when you make a choice
– Ex. OC of college for 4 years = job for 4 years
• “No such thing as a free lunch”
Economic Choice
• Marginal cost - cost of using one more unit of
a good or service
– Ex. Marginal cost of taking one more class at
college = 2 hours of wages at work per week
• Marginal benefit - benefit
of using one more unit of a good
or service
– Ex. Marginal benefit of taking one
more class this semester = one
less class in a future semester
Application 2: Cost-Benefit
Analysis
1. Create a cost-benefit analysis for going to college. What are the
possible costs of going to college (monetary and otherwise)? The
possible benefits?
2. Take a look at your list of costs and put a star next to any that
might be considered opportunity costs.
3. Now finish these two sentences:
– The marginal cost of going to college for one additional year
is _____________________.
– The marginal benefit of going to college for one additional
year is ___________________.
Production Possibilities
• A production possibilities curve (PPC) is a
graph used to illustrate the impact of scarcity on
an economy by showing the max # of goods or
services that can be produced using limited
resources
Production impossibility
Guns
More guns than butter,
Efficient use of resources
Underutilization of resources
More butter than guns,
Efficient use of resources
Butter
Application 3: Production
Possibilities Curve
• Create your own production possibilities curve
for a fictional economy. Mark one point (A) in
which resources are being underutilized, one
production impossibility (B), and the spot at
which you think the perfect balance is being
achieved (C)
Production Possibilities
• Shifts in a PPC
– Shift out: new resources discovered, new
technologies developed to increase efficiency
– Shift in: resources exhausted, economic turmoil,
etc.
Application 4: Shifting PPC
• Draw a production possibilities curve for 2
items. Now write a short scenario that might
cause a shift in the PPC and then draw that
shift as it would occur.
Closing Activity
Marlena is a single mom who has lost her job.
She has a college education and work experience
as a paralegal, but the only place that seems to
be hiring is WalMart. She must choose between
working full time at WalMart or looking for a job
full time.
1. Create a cost-benefit analysis for Marlena’s
choice to work at WalMart
2. What would be the opportunity cost of Marlena
working 40 hours a week at WalMart?
Stock Market
• stock = ownership of a company
• owning stock= investing in the future of a
company
• Stock rises, falls with performance of
company, overall economic performance,
etc.
Stock Market
• Most stock bought/traded through a “broker,”
professional investor
• New companies = riskier, more chance for dramatic
gains and losses
• Well-established companies = less risky, less chance
for dramatic gains and losses
Term Review
• Opportunity cost – the things you could
have done INSTEAD
• Marginal cost – the cost of using ONE
MORE UNIT – specific, measurable
Opening Activity - Review
1. You’re hungry. What is one cost and one benefit of eating a
bag of Doritos?
2. What is an opportunity cost of choosing a bag of Doritos?
3. What is the marginal cost of eating one more Dorito?
4. Create a production possibilities curve for 2 products.
5. Draw a dot at a point where all resources are fully employed
and label it A.
6. Draw a dot at a spot where resources are being underutilized
and label it B.
7. Draw a dot at a production impossibility and label it C.
8. Show how a sudden change in technology that allows the
company to use its resources more effectively would change
the PPC and label this D.
9. Draw an arrow showing what would happen if one product
became more popular than the other product and label it E.
App 1 – College or not
1. What is the marginal cost of getting a 4 year
Bachelor’s degree rather than a 2 year
Associate’s degree?
2. According to the first graph, what are some of
the opportunity costs of investing in education?
3. What level of education seems to give you the
most financial utility (best monetary return for
your investment)?
4. If this data is accurate, why would anyone
choose to get a Bachelor’s degree? What are
the costs/benefits not covered in this data?
Closing: College Cheating – An Economic
Analysis
• 60.8%: students who admit to cheating
• 16.5%: students who said they didn’t regret it
• 3.41: average GPA of students who admitted to
cheating
• 2.85: average GPA of students who did not cheat
• 41%: Americans who consider cheating a problem
• 95%: cheaters who don’t get caught
1. What incentives are there for cheating?
2. What is the utility of cheating?
3. Why would anyone choose not to cheat based on
these statistics?
Opening Activity
Grab a Freakonomics book and turn to pg. 238.
1. Why don’t economists vote?
2. What does the Swiss example tell us about the
major incentives to vote?
Economic Systems
• How a society uses scarce resources to satisfy
people’s wants
– Traditional
– Command
– Market
Economic Systems
• Traditional Economy
– Simplistic system structured around customs and
survival
– Hunter/gatherer societies
– Good of the group takes precedence over
individuals
Economic Systems
• Command Economy
– Centrally-planned system
– Govt owns means of
production
– Communism/Socialism
Economic Systems
• Market economy
– Laissez-faire (leave-alone, or hands off), free
enterprise
– Competition
– Producers specialize
– Private property
– Consumer sovereignty: consumers direct
economy by voting with their wallets
Application 2: What do you vote for
as a consumer?
1. Pepsi or Coke?
2. McDonalds or Burger King?
3. Facebook or Twitter?
4. Netflix or Redbox?
5. Little Caesars or Dominos?
6. WalMart or Target?
7. Taylor Swift or Beyonce?
8. Ford or Honda?
9. Sour patch kids or Reeses?
10.Google or Bing?
Circular Flow Model of a Market Economy: allows
you to visualize how elements of market
economies fit together
Product
Market
Households
Businesses
Factor
Market
Application 3: Create a circular flow
model
• Choose a product/company and show how it fits
into the circular flow model.
• Ex:
Product
Market
Ex: Dick’s
Sports
Joe
NIKE
Factor
Market
Ex: Rubber
Opening Activity
1. Why do circular flow models not apply to
command or traditional economies?
2. What might a model of a command economy
look like instead? (draw it!)
3. Why do consumer votes matter in a market
economy?
Application 4: Book assignment
• Turn to pg. 64 and 65 and answer the
questions next to each source (Thinking
Economically A, B, and C), then answer
#3 in the Synthesizing section
Opening Activity
1. In what ways is the US not a true market
economy? Where do we have government
intervention in our economic system?
2. Some people argue it is unfair for people who
do not have children, or who send their
children to private school to have to pay taxes
to fund public schools. Do you agree or
disagree with this argument and why?
Economic Systems
• Mixed Economies: combine elements of
traditional, command, market
– Most common
• Some industries nationalized – controlled by
govt.
– Others are privatized: left in private ownership
US Economic System
• USA = Modified free enterprise system
– Private/public partnership
– Government is both a producer and a consumer
Circular Flow Model of US System
spending
products
Product
Market
taxes
resources
Businesses
products
taxes
spending
products
Govt.
Households
Factor
Market
US Economic System
• Existence of market failures
– When people who are not part of a market
interaction either benefit or pay its costs
• Ex. Free riders = those who do not pay for
goods/services but benefit anyway
– Ex. Fireworks display, traffic lights
Market Failures, cont.
• Externality = side effect of a transaction that
affects someone other than producer or
consumer
– Can be negative (pollution), or positive
(neighbor’s flower garden)
US Economic System
• Public Goods: when govt. provides a product
or service, fixes a market failure
– No one is excluded from benefits
– One person’s use of product does not reduce its
usefulness to others
– Ex: street lights
– Private companies can’t compete
Application 5: Public Good, Y or N
• For the products below, write Y if it is a public
good and N if it is not. If not, explain WHY not;
which criteria is missing?:
1.
2.
3.
4.
5.
6.
7.
8.
Roads
Public Schools
Welfare
National Defense
Public pool
Banks
Sewer Systems
Fireworks displays
Opening Activity
Read “The Importance of Thinking
Marginally” in the handout on pg’s 4-5
1. What is a “sunk cost”? Give an example.
2. Why should airlines not consider the cost
of maintenance and labor for a flight
when deciding whether or not to let one
more passenger on board?
Opening Activity
• Is this an example of a marginal cost, an opportunity cost, or
just a cost?
1. When you choose to buy a candy bar you are giving up buying a
bag of chips.
2. Choosing to walk to school 1 more day a week costs you 15
minutes you could have slept in.
3. Buying a new car means you can’t go on that vacation you had
planned.
4. One cost of wearing tight pants is discomfort when you are sitting.
5. Running track costs you a couple hours of time every day after
school.
6. Skipping one day of practice costs you 20 push ups at the next
practice.
7. The cost of being tardy one additional time is a day of Friday school.
8. If you hadn’t bought that Xbox last year you could’ve stuck that
money in the bank and earned $6.00 in interest by now.
Research Analysis
•
•
•
•
•
Article Title
Author
Source (Name of Journal, volume etc.)
Publishing date
Short summary of article/study including major
conclusions
• Short summary of how this article contributes to
your project (Which line of inquiry does it
address? What conclusion(s) does it lead you
to?
Opening Activity
In 1945 Branch Rickey, president of the Brooklyn Dodgers signed
Jackie Robinson, the first black player to get a contract to play
professional baseball. We’d like to believe that Rickey was an
open-minded man with a heart of gold, but economists suggest he
was just responding to incentives. At that time there were 3
baseball teams in NY competing for fans: the Yankees, the
Giants, and the Dodgers.
1. What incentives might Rickey have to sign Jackie Robinson?
2. What costs could he potentially incur by signing a black player
in 1945, 9 years before Brown v. Board?
3. What incentives might Jackie Robinson have to leave the allblack league and join the all-white Dodgers team?
Bonus Question: Does this scenario suggest that free markets
are moral? Why or why not?
Freakonomics - Cheating
1. Why did the incentive to be on time at the
day care center fail?
Opening
Complete the sentences below:
1. An opportunity cost of buying a Chipotle burrito
is ______________.
2. A marginal cost of sleeping in 5 minutes is
__________________.
3. When someone is watering their lawn and you
get sprayed with the water on a hot day, this is
an example of a(n) ______________.
Freakonomics
In a well-structured paragraph explain how this
scenario represents the struggle between
command and market economic forces in the
United States.
Think about: what would be different if this were a
command economy? What would be different if
this were a full market economy? Who is suffering
as a result?
Opening
• Externality or free rider?
1. A factory emits pollution and a little boy gets
sick.
2. There’s an outdoor concert and people watch
from outside the fenced in area.
3. The concert is in a lot near Joe’s lemonade
stand and Joe’s sales go up significantly as a
result.