activator chapter 1 - bowie high school -...
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Activator Chapter 1
List the problem that each of the following faced:
1. The Consumers – You and I
2. The Producer – Mattel
3. The Stores – Babies, Toys R Us, Walmart, etc.
• During the holiday season of 1996, a children's toy appeared on Good Morning
America. The toy, produced by Mattel, had sat on the shelves with very little sales until it
appeared on the show. After the toys appearance, its popularity improved and it became
the most sought after product of the holiday season. Unfortunately, Mattel did not
anticipate the doll’s popularity, only producing 400,000 units, and were not able provide
the product in a timely manner at the store level (over 1,000,000 were in demand).
Unit 1: Basic Economic Concepts
CHAPTER 1 – The Ten Principles of Economics
Scarcity - fundamental problem facing all people; unlimited
wants and limited resources to satisfy those wants
Society cannot produce all the goods and services people
want
Scarcity applies to everyone; no one can have an endless
supply of everything
e.g. - money, time, rest, etc.
Application Question List three things that you feel are scarce in your life,
what has caused them to become scarce?
What is Economics? Economics – the study of choices; how society manages its resources
“Oikonomos” (Greek) “One who manages a household”
What do economists study?
Individual Decisions – how much they work, save, and invest, what they
buy, how they interact etc.
Social decisions – allocation of resources, decisions of governmental
agencies, etc.
Forces and trends – growth in income, unemployment, inflation, etc.
The Ten Principles of Economics Principle 1 – People face tradeoffs
Principle 2 – The cost of something is what you give up to get it
Principle 3 – Rational people think at the margin
Principle 4 – People respond to incentives
Principle 5 – Trade can make everyone better off
Principle 6 – Markets are usually a good way to organize economic activity
Principle 7 – Governments can sometimes improve market outcomes
Principle 8 – A country’s standard of living depends on its ability to produce goods and services
Principle 9 – Prices rise when the government prints too much money
Principle 10 – Society faces a short-run trade-off between inflation and unemployment
How People Make Decisions
Principle 1: People face trade-offs Trade-off – a sacrifice that must be made to
obtain a certain choice, rather than the
alternative choice
We always give up something to get
something else
“There is no such thing as a free lunch.”
Individuals, households and society all
face tradeoffs
Efficiency vs. Equality Tradeoff (social)
Efficiency – society is getting the maximum
benefits from its scarce resources
Equality – society distributes benefits
uniformly among its members
Welfare system, unemployment
insurance, food stamps, etc.
Choice Alternatives
Choices
What you
would have
done if you
didn’t come to
class
1. Coming to
Economics
Class
1.
2.
3.
1.
Application Question Directions: Create a 3 column chart, label it as shown below. In the second
column, list 3 possible alternatives that you could have made other than
your choice to come to school. In the third column, list the alternative that
you would have desired the most.
How People Make Decisions Principle 2: The cost of something is what you give
up to get it Opportunity Cost – used by economists to measure the cost of
decision-making; value of the most desirable alternative given up
Next best alternative use of money, time, or resources (Highest-
valued alternative forgone)
8
Coming to Economics Sleeping (Opportunity Cost)
Trade-Offs
Individuals and Trade-Offs
Parents and Trade-Offs
Society and Trade-Offs
Turn to page 4 in your book. Write a summary and example(s) of each of the
following listed below.
How People Make Decisions Principle 3: Rational people think at the margin Margin - an edge and the area immediately adjacent to it; a border
Rational people - systematically an purposefully do the best they
can to achieve their objectives
Marginal change - small incremental adjustments to a plan of action
Rational decision maker
Marginal benefits > Marginal costs
10
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep
Economics
or
Thinking at the Margin
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep Yes
Economics Yes
or
Thinking at the Margin
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep Yes No
Economics Yes Yes
or
Thinking at the Margin
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep Yes No Yes
Economics Yes Yes Yes
or
Thinking at the Margin
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep Yes No Yes No
Economics Yes Yes Yes No
or
Thinking at the Margin
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep Yes No Yes No No
Economics Yes Yes Yes No Yes
Thinking at the Margin
or
Alternatives
Criteria
Immediate
Satisfaction
Long Term
Benefits
Entertaining Immediate
Financial
Benefits
Necessary for
Long-term
success
Sleep Yes No Yes No No
Economics Yes Yes Yes No Yes
Thinking at the Margin
or
Options Benefit Opportunity
Cost
Thinking at the Margin
Options Benefit Opportunity
Cost
1st hour of extra
study time
Grade of C on
test
One hour of
sleep
Thinking at the Margin
Options Benefit Opportunity
Cost
1st hour of extra
study time
Grade of C on
test
One hour of
sleep
2nd hour of
extra study
time
Grade of B on
test
2 hours of
sleep
Thinking at the Margin
Options Benefit Opportunity
Cost
1st hour of extra
study time
Grade of C on
test
One hour of
sleep
2nd hour of
extra study
time
Grade of B on
test
2 hours of
sleep
3rd hour of
extra study
time
Grade of B+ on
test
3 hours of
sleep
Thinking at the Margin
How People Make Decisions Principle 4: People respond to incentives Incentive - something that influences a person to act; positive
(reward) or negative (punishment)
Law of unintended consequences - outcomes that are not the
outcomes intended by a particular action
Gasoline tax – consumer purchases smaller more fuel efficient cars;
carpool; public transportation
Stossel Video
http://www.youtube.com/user/StosselClassroo
m#p/u/29/iuZOAiga_9A
Unintended Consequences
How People Interact Principle 5: Trade can make everyone better off Specialization – allows each country to focus on the activities that
cost them the least
People/countries can buy a greater variety of goods and services
at lower cost
How People Interact Principle 6: Markets are usually a good way to
organize economic activity Market – buyers and sellers meet to exchange goods and services
Market Economy (capitalism/free enterprise) – economic decisions, what to
produce, how to produce it, who to produce it for, are made through by
individuals based on exchange of goods and services
Adam Smith’s Invisible Hand – natural flow of the economy based on the
consumer and producer relationship (supply and demand)
Command Economy (communism) – contrast of market economies;
government officials (central planners) allocate economy’s scarce resources
How People Interact Principle 7: Governments can sometimes
improve market outcomes
Role of Government
Enforce the rules – business ethics,
maintain fair trade, produce public
goods, fair employment, etc.
Market failure - situation in which the
market on its own fails to produce an
efficient allocation of resources
Environmental
Protection/pollution, public goods
to free-riders, monopolies, etc.
Externality - impact of one person’s
actions on the well-being of a
bystander
Market power (monopoly) - ability of a
single person (or small group) to
unduly influence market prices
Property rights – ability of an individual
to own and exercise control over
scarce resources
Junk!!!
Stossel Video
http://www.youtube.com/watch?v=EVHw_U1
v3HI
How the Economy as a Whole Works Principle 8: A country’s standard of living depends
on its ability to produce goods and services Productivity – Quantity of goods & services produced from each unit
of labor input
2009 - US worker avg. 46,436 India was $1030
Higher productivity – Higher standard of living
How the Economy as a Whole Works
Principle 9: Prices rise when the government prints
too much money Inflation - An increase in the overall level of prices in the economy
Growth in quantity of money reduces the value of money
Hyperinflation in Germany after WWI, Zimbabwe dead currency
in 2009
How the Economy as a Whole Works Principle 10: Society faces a short-run trade-off
between inflation and unemployment Long-run effect of monetary injection is inflation
Short-run effects of monetary injections:
Business cycle – fluctuations in economic activity
Stimulates - overall level of spending
Higher demand for goods and services
Firms – raise prices, hire more workers, produce more goods and services
Lower unemployment
People Face Tradeoffs
Description: individuals, businesses and
households face alternative decisions that could be
made, but must always give up something in order to
obtain something else in light of scarce resources.
Picture: this picture represents an individual
deciding between various alternatives and facing the
tradeoff dilemma.
The Ten Principles of Economics Poster Project
Poster Requirements:
1. Title - The Ten Principles of Economics.
2. Summary Statement – “The Ten
Principles of Economics provide a
general guide and outline to the
important concepts found in economics.”
3. At least 10 pictures to represent each of
the principles.
4. Label, describe and summarize picture
for each of the 10 principles
Principle 1 – People face tradeoffs
Principle 2 – The cost of something is what you give up to get it
Principle 3 – Rational people think at the margin
Principle 4 – People respond to incentives
Principle 5 – Trade can make everyone better off
Principle 6 – Markets are usually a good way to organize economic activity
Principle 7 – Governments can sometimes improve market outcomes
Principle 8 – A country’s standard of living depends on its ability to produce goods and services
Principle 9 – Prices rise when the government prints too much money
Principle 10 – Society faces a short-run trade-off between inflation and unemployment
The Ten Principles of Economics Group 1
Principle 1 – People face tradeoffs
Principle 2 – The cost of something is what you give up to get it
Group 2
Principle 3 – Rational people think at the margin
Principle 4 – People respond to incentives
Group 3
Principle 5 – Trade can make everyone better off
Principle 6 – Markets are usually a good way to organize economic activity
Group 4
Principle 7 – Governments can sometimes improve market outcomes
Principle 8 – A country’s standard of living depends on its ability to produce goods and services
Group 5
Principle 9 – Prices rise when the government prints too much money
Principle 10 – Society faces a short-run trade-off between inflation and unemployment
Due Monday 1-24 1. Chapter 1 Notes
2. Homework – Incentive Pay
3. Homework – Adam Smith and the Invisible Hand
4. Homework – Why You Should Study Economics
5. Youtube Video – Scarcity and Choice
6. Youtube Video – Micro vs. Macro
7. Daily Tens
8. Chapter 1 Practice Review
*Reminders – Ch. 1 Self-Test Online, print Ch. 2 Notes, take Ch. 2 Pre-quiz by tuesday