Economic way of thinking: Economics - Concepts and Choices, 2011. Holt McDougal

• 1. The Economic Way of Thinking Dr. T. D. Mitchell Bonneville High School, Idaho Falls, Idaho

2. Scarcity: The Basic Economic Problem Principle 1 People Have Wants Principle 2 Scarcity Affects Everyone Goods Services Consumer Producer Economics: Concepts and Choices, 2011. Holt McDougal 3. Scarcity: The Basic Economic Problem Scarcity Leads to Three Economic Questions What will be produced? How will it be produced? For whom it will be produced? Economics: Concepts and Choices, 2011. Holt McDougal 4. The Factors of Production Land Labor Capital Economics: Concepts and Choices, 2011. Holt McDougal Entrepreneurship 5. Economic Choices: Opportunity Cost Economics: Concepts and Choices, 2011. Holt McDougal Making Choices Incentives Utility Economize Factors that help you make an economic choice: 1. Motivations for choice 2. No Free Lunch 6. Trade-Offs and Opportunity Cost Economics: Concepts and Choices, 2011. Holt McDougal Making Trade-Offs Counting the Opportunity Costs Analyzing Choices Marginal Cost Marginal Benefits 7. Analyzing Production Possibilities Economics: Concepts and Choices, 2011. Holt McDougal Economic Models Production Possibilities Curve (Frontier) Assumption Resources are fixed All resources are fully employed Technology is fixed 8. Review: Production Possibilities Curve Economics: Concepts and Choices, 2011. Holt McDougal 9. What We Learn from PPCs Economics: Concepts and Choices, 2011. Holt McDougal Efficiency Underutilization Law of increasing opportunities costs Beans and Bullets 10. Changing Production Possibilities Economics: Concepts and Choices, 2011. Holt McDougal 0 1 2 3 4 5 6 7 0 2 4 6 8 10 12 14 Refrigerators Cars Production Possibilities Curve 11. Economists Toolbox Economics: Concepts and Choices, 2011. Holt McDougal Statistics Using economic models Charts and tables Using Graphs 0 2 4 6 Category 1 Category 2 Category 3 Category 4 Chart Title Series 1 Series 2 Series 3 0 2 4 6 Category 1 Category 2 Category 3 Category 4 Series 1 Series 2 Series 3 12. Economists Study Economics: Concepts and Choices, 2011. Holt McDougal Macroeconomics The study of the whole economy Microeconomics The study of the individual consumer Units of Study Units of Study Economic Growth Economic Stability International Trade Consumer Markets Business Markets Labor Markets Topics of interest Topics of Interest Money, Banking, finance Government Taxing and Spending Policies Employment and unemployment Inflation Markets, prices, costs, profits, Competition, Government Regulations Consumer Behavior Business Behavior 13. Positive and Normative Economics Positive Economics A way of describing and explaining economics as it is, not as it should be. Involves verifiable facts, not value judgments. Normative Economics A way of describing and explaining what economic behavior ought to be, not what it actually is. Does not involve value judgments because it seeks to make recommendations for action. Economics: Concepts and Choices, 2011. Holt McDougal 14. Adam Smith: Founder of Modern Economics 250 Years ago, economics did not exist as an academic discipline. In 1776, Adam Smith changed all this. Born in Scotland, studied literature, logic, and moral philosophy. Wrote Wealth of Nations in 1776. Economic self-interest The invisible hand Became the foundation of modern economics Economics: Concepts and Choices, 2011. Holt McDougal