Introduction to Economics Welcome to AP Economics ECONOMICS

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Introduction to Economics Welcome to AP Economics!

Introduction to Economics Welcome to AP Economics!

ECONOMICS

ECONOMICS

The World & Resources People +

The World & Resources People +

Why do we need Economics? 1) Resources are SCARCE 2) People have Unlimited Wants

Why do we need Economics? 1) Resources are SCARCE 2) People have Unlimited Wants & Needs FORCES: 3) Society to allocate resources

Formal Definition of Economics • The social science of how society allocates scarce resources

Formal Definition of Economics • The social science of how society allocates scarce resources among unlimited wants and needs. End of Day 1

 • Economics is the social science of how a society allocates their scarce

• Economics is the social science of how a society allocates their scarce resources among unlimited wants and needs. Air versus Oil

Economic Systems • All economic systems allocate scarce resources • Society must choose both

Economic Systems • All economic systems allocate scarce resources • Society must choose both a political & economic system

3 Types of Economic Systems • MARKET • COMMAND • TRADITIONAL

3 Types of Economic Systems • MARKET • COMMAND • TRADITIONAL

There is NO Free Lunch • Nothing is free in economics • People face

There is NO Free Lunch • Nothing is free in economics • People face Trade-offs in all decision making • Decisions have both: -Opportunity Costs & Opportunity Benefits -Short Run and Long Run implications

2 Types of Costs:

2 Types of Costs:

Marginal Analysis • Economic Decisions are made at the Margin • Marginal Benefit vs.

Marginal Analysis • Economic Decisions are made at the Margin • Marginal Benefit vs. Marginal Cost • Value of next unit consumed or produced • Rational people make decisions where MB = MC Price MC MB Quantity

Marginal Benefit Worksheet MB High School Associate Bachelor’s Master’s Doctorate MC Total Earnings Total

Marginal Benefit Worksheet MB High School Associate Bachelor’s Master’s Doctorate MC Total Earnings Total Cost $800, 000 $1, 200, 000 $2, 100, 000 $2, 500, 000 $0 $25, 000 $100, 000 $2, 500, 000

Trade-off Analysis Should I go to college? Opportunity Benefit Opportunity Cost Explicit Cost? Implicit

Trade-off Analysis Should I go to college? Opportunity Benefit Opportunity Cost Explicit Cost? Implicit Cost? Long Run? Short Run?