INTRODUCTION TO ECONOMICS What is Economics Economics The

INTRODUCTION TO ECONOMICS

What is Economics? Economics The study of human behavior in relation to scarce resources. (The idea that people make smart decisions with there resources to maximize them)

Then how do you explain this? http: //media-cdn. tripadvisor. com/media/photos/07/5 d/33/f 8/cinnabon. jpg

That’s almost 2, 000 x the cost of a gallon of tap water and twice the cost of a gallon of regular gasoline. - Slate Magazine

Okay people are stupid sometimes… But more often than not they choose to “economize. ”

What is Economics? � Economics is the social science concerned with the way society chooses to use its limited resources to produce goods and services. � Put simply, Economics is the study of choice

Economics? Studying choice? Is that all Economist do? No, they try to predict people’s behavior involving scarce resources. Economics is the social science concerned with the way society chooses to use its limited resources to produce goods and services.

What is an 'Economic Man ? ’ � An economic man, a term first coined in the late 19 th century, has developed to refer to a hypothetical individual who acts rationally and with complete knowledge, but entirely out of self-interest and the quest to maximize personal utility. An economic man is an imaginary figure who is able to satisfy economic models that push for consumer equilibrium. All of an economic man's choices are based on the fulfillment of his or her "utility function", meaning the ability to maximize any situation that involves choice.

Opportunity Cost Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made � � In a greatly simplified version, opportunity cost assumes that you can quantify the "costs" of many of the decisions (choices) you make in everyday life. Assume you have an option "A" and an option "B" to choose from. Making a choice of option "A" can be quanitified as "costing" you all of the benefits of what choosing option "B" would have given you. The reverse is true- the cost of choosing option "B" is all of the benefits that option "A" would have given you.

Opportunity Cost We all have to make choices in life. When we do, we decide to have more of one thing and less of another. The opportunity cost of any decision is the value of the best alternative given up. For example… how would you spend $100? (What is your “option A” and your “option B? ”)

Still Confused About Opportunity Cost? � Try watching this video: Opportunity cost

Opportunity Cost � Opportunity Cost - Create Google doc and answer the following 2 question in detail 1. Going back a year, pick one choice/decision you made: a. What’s the opportunity cost of the choice/decision you made b. What’s the opportunity cost of the alternative choice/decision you gave up 2. Going forward a year, pick one choice/decision you think you will make: a. What’s the opportunity cost of the choice/decision you will make b. What’s the opportunity cost of the alternative choice/decision you will give up

Opportunity Cost � Now with your understanding of Opportunity cost, complete the opportunity cost worksheet that is on the class web page.