Economically Speaking Whats the BIG PROBLEMO Economically Speaking
Economically Speaking… What’s the BIG PROBLEMO?
Economically Speaking… What’s the BIG PROBLEMO?
Famous ECONOMICS Majors
SCARCITY!
Scarcity exists because… WANTS & NEEDS are UNLIMITED but … ______, RESOURCES are LIMITED! _____
Is your problem ?
DO NOT CONFUSE! SHORTAGE= SCARCITY = ◦ permanent!
Causes Poor distribution of resources Rapid increase in demand Personal perspective
Strategies for coping… Do without Conserve/do better with what you’ve got Redistribute Create more
Scarcity necessitates
The BASIC ASSUMPTIONS of ECON…
BASIC ASSUMPTION: PEOPLE are SELF-INTERESTED.
ECONOMICS: The study of HOW self-interested ◦ Individuals ◦ Nations Make CHOICES about ways to use SCARCE RESOURCES To PRODUCE ◦ Goods (items) ◦ Services (actions) to meet ◦ needs ◦ wants
KEY QUESTION: Does SELFINTERESTEDNESS = SELFISHNESS?
Economic Analysis is Scientific Analysis: Control & test ONE variable at a time! The rule = CETERIS PARIBUS : All other things remaining equal
Schools of Economic Thought Classical and Neoclassical Economics assume RATIONALITY: People are RATIONAL decision makers. People make choices which they think will MAXIMIZE their SATISFACTION. Rational thinking is MARGINAL thinking ◦ the choice = whether to produce or consume ONE ADDITIONAL UNIT.
If you were absent or you want to review these concepts in more depth, click the first link for You. Tube and the last one for an FLV file at Mrs. Shiv’s site. YOU TUBE: Episode #2 Scarcity & Choice ECON LINKS: Episode #2 PREVIEW
ECONOMIC MODELS: THEORETICAL MODELS ◦ Capture essential features ◦ Strip away unnecessary details (simplify) Diagrams, graphs, forumlas TEST: how well the model reflects REALITY K. I. S. S. the sexy line graph!
If you need math help, try this: YOU TUBE: Episode #6 – Graph Review ECON LINKS: Episode #6 – Graph Review REVIEW
FREE GOODS Resources so abundantly available that they don’t seem limited EX. : AIR BUT…TANSTAAFL… ◦ There ◦ ◦ ◦ ◦ No Such Thing As A Free Lunch
A CHOICE is a … The decision to have one thing and to do without another.
OPPORTUNITY COST = The value of the NEXT BEST ALTERNATIVE The FOREGONE alternative Whacha’ coulda’ hadda’ (like a V-8!) CAUTION! AVOID at all COSTS!!!!!! COMMON ERROR: counting the value of ALL alternatives combined!
CHOICE has COSTS! Any decision we make entails a sacrifice. Sacrifices can come in the form of ◦ Time ◦ Money …. . or BOTH In ECONOMICS, they are known as COSTS!
ACCOUNTANTS vs. ECONOMISTS ACCOUNTANTS like to count EXPLICIT COSTS – (DIRECT) $$$$$ Also called ACCOUNTING COSTS ◦ ASSETS (what you OWN!) CREDITS (+) “in the BLACK” LIABILITIES (what you OWE!) DEBITS (-) “in the RED”
ACCOUNTANTS vs. ECONOMISTS like to count IMPLICIT COSTS (INDIRECT) Also called OPPORTUNITY COSTS Unlike accountants, they consider all costs. The ECONOMIC COST is the complete cost. EXPLICIT COST (direct) +IMPLICIT COST (indirect) ECONOMIC COST or ACCOUNTING COST +OPPORTUNITY COST ECONOMIC COST or
CHOICE has COSTS!
KEY ECONOMIC QUESTIONS WHAT to produce? (What are we gonna’ make? ) HOW are we gonna’ make it? HOW much are we gonna’ make ◦ Now ◦ Later WHO’S gonna’ get it? How you answer = YOUR ECONOMIC SYSTEM (Coming soon …)
FACTORS of PRODUCTION INPUT BREAD OUTPUT toaster TOAST
Click the first link to access a discussion of PRODUCTIVE RESOUCES (factors of production) at You. Tube; click the 2 nd for a link to an FLV file at Shiv’s site: YOU TUBE: Episode #3 – Resources ECON LINKS: Episode #3 - Resources REVIEW FACTORS OF PRODUCTION
FACTORS OF PRODUCTION LAND (natural resources) LABOR (human resources) CAPITAL (machines or equipment people use to make goods and services for sale are PRODUCTIVE CAPITAL. ***Money is FINANCIAL CAPITAL not a productive resource. You don’t use it to make anything!) *ENTREPRENEURSHIP (willingness to take a risk) TECHNOLOGY (use of science to develop new products and methods)
KEY FACTOR= ENTRPRENEURSHIP The ability to ◦ start new businesses ◦ Introduce new products and techniques ◦ Improve management techniques Involves ◦ ◦ Drive Desire Savvy Energy – physical, emotional, and intellectual ◦ WILLINGNESS TO TAKE RISKS!
PRICE TAG on FACTORS of PROD. LAND = ◦ RENT LABOR = ◦ WAGES & SALARIES CAPITAL = ◦ INTEREST ENTREPRENEURSHIP = ◦ PROFIT TECHNOLOGY = ◦ RESEARCH & DEVELOPMENT
PRODUCTIVITY is the key to ECONOMIC GROWTH is the key to INCREASING STANDARDS OF LIVING
PRODUCTIVITY is The ability to produce greater QUANTITIES or QUALITY of goods and services ◦ Better ◦ Faster EFFICIENCY! ◦ Productive efficiency ◦ Pareto efficiency ◦ Allocative efficiency
KINDS OF ECONOMICS MICROECONOMICS ◦ “The Little Picture” One individual One firm One industry MACROECONOMICS ◦ “THE BIG PICTURE” The nation The world
Microeconomics vs. Macroeconomics (Youtube or Shiv) YOU TUBE: EPISODE #4 – Macroeconomics v. Microeconomics ECON LINKS: EPISODE #4 – Macroeconomics v. Microeconomics REVIEW MICRO v. MACRO
POSITIVE and NORMATIVE POSITIVE ◦ What IS ◦ Fact……. can be proved TRUE or FALSE! “Mrs. Shivers is your economics teacher. “There are 5, 000 chairs in this room. “There are 5 chairs in this room. NORMATIVE ◦ What OUGHT ◦ OPINION…. Can NOT be proved TRUE or FALSE ◦ VALUES …. We should wear uniforms.
Episode 5: Positive & Normative Analysis http: //www. youtube. com/watch? v=t 3 Ax. XZu m. Klk&NR=1 Choose VIDEO TUTORIAL Episode #5 ECONOMICS REVIEW: Positive and Normative Analysis
REVIEW - Who Wants to Be a Millionaire? : ECON LINKS: Scroll to GAMES - WHO WANTS TO BE A MILLIONAIRE REVIEW: WHO WANTS TO BE A MILLIONAIRE?
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