The Science of Choice

The Science of ChoiceKEY UNDERSTANDING:Scarcity is the reason why people have to choose and decide on different aspects which affect their lives and the economy.

KEY QUESTION:Why is choice a part of our lives?

Discuss the different the different

choices and economic decisions of

individual.

Study the emergence of different

economic thoughts.

Define Economics.

Explain how scarcity affects our

lives.

Analyze the influence of

opportunity cost and benefit in decision making of an individual.

Why is choice part of

our lives?

Write in your notebookyour answer on this question? Write many answers as you can….

Why is choice part of our lives?

Choose your partner and share your experiences about making choices and decisions. Partner A and B. Partner A will share his/her thoughts about making choices and decision. Partner B will listen. Then after partner A, then partner B will share his/her thought about making choices and decisions.

Why do people make choices?

Why is it important to make a choice?

INTRODUCTION TO ECONOMICS

EMERGENCE OF ECONOMIC THOUGHTS

GREEK WORD

NOMOS - MANAGEMENT

OIKOS - HOUSE

Xenophon

‘OICONOMICUS” – Greek Economy – Premarket. Products – uniform or traded or organized exchange or analyzed for their own sake.Human contract.

Plato

“The republic”- a blueprint for an economy in which cities are founded on key principles of specialization and division of labor that creates mutual interdependence and further leads to reciprocal exchange.

Aristotle

“Topics and Rhetoric” –exchange as a way to satisfy individual and collective wants and not as a means for the state to accumulate wealth.

Mercantilism…

Francois

Quesnay

Believed in the importance of nature in the economic development of the country. Man should use natural resources wisely and properly.

Tableau Economique – flow of the factors of production, goods and services in diff. sector of the country.

MERCANTILISM – Emphasized the utilization of all available lands for agriculture, mining and manufacturing. Finish products have higher price than raw materials. Their goal is accumulate silver and gold.PHYSIOCRATS - to have equilibrium in the economy is it necessary to use the natural resources properly and wisely to attain development.

MERCANTILISTS – economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism.

PHYSIOCRATS - member of 18thc. Group of French economist who believed that agriculture was the source of all wealth and advocated free trade.

CLASSISTS – prejudice against people who belong to a particular socials class

Father of modern economics. “Laissez fair” doctrine or ‘let alone policy’. The Gov’t should not interfere with the activities of man towards free market. Instead focus on peace and order of the country. “An Inquiry Into the Nature and Causes of the Wealth of the Nations”

Defined economics as the practical science of production and distribution of wealth.

• 1. Revolutionary, economic thinker who championed the free market economy.

• 2. All the powerful European powers practiced MERCANTILISM.

• 3. Mercantilism is the control of the economy by the government.

• 4. The government controls trade and creates monopolies.

• 5. Mercantilism led to colonies.

David Ricardo

“The Law of Diminishing Marginal Returns” - The effects of natural resources (land) in the development of the economy.Increase number of people will drive man to cultivate even the idle land to support his necessities in life.

Thomas Robert Malthus

“Malthusian Theory” – the effects of rapid increase of population. It can cause famine and will affect the economic activities of man.

Karl Marx

“Father of Communism” – all industries and other sources of wealth should be nationalized so as to achieve equality among the people.

WHAT YOU ALREADY KNOW ABOUT ECONOMICS?K

GROUP 1

W WHAT ARE THE THINGS YOU WANT TO LEARN ABOUT ECONOMICS?

GROUP 2

LGROUP 3

WHAT ARE THE THINGS YOU LEARNED ABOUT ECONOMICS.

ECONOMICS AS A SOCIAL SCIENCE

CONCERNED WITH THE STUDY OF HUMAN BEHAVIOR AND PRACTICES TO EFFECIENTLY USE THE SCARCE RESOURCES TO ACHIEVE MAN’S SATISFACTION.

DEAL HOW PEOPLE MAKE A LIVING AND HOW SOCIETY PROVIDES ALL THE NEEDS OF MAN.

MICROECONOMICS

CENTERED IN DISCUSSING THE SMALL UNIT OF THE ECONOMY.

TACKLED THE BEHAVIOR OF THE CONSUMERS,PRODUCERS AND THE MARKET..

HOW DO INDIVIDULA MAKE ECONOMIC DECISIONS?

MACROECONOMICS

STUDY THE BEHAVIOR OF THE ENTIRE ECONOMY.

FOCUSES ON THE AGGREGATE ACTIVITIES OF THE GOVERNMENT, INDUSTRY AND HOUSEHOLD.

BIG PICTURE:GROWTH, EMPLOYMENT.CHOICES MADE BY LARGE GROUP.

FIVE ECONOMIC QUESTIONS

Society (we) must figure out

• WHAT to produce (make)• HOW MUCH to produce

(quantity)• HOW to Produce it

(manufacture)• FOR WHOM to Produce

(who gets what)• WHO gets to make these

decisions?

STUDIES THE CHOICES AND DECISION OF PEOPLE AND SOCEITY.

ECONOMISTS

SCARCITY: unlimited wants and needs but limited resources

BUT, there’s a Fundamental Problem:

THE RESOURCES ARE LIMITED

TO SATISFY THE UNLIMITED WANTS AND NEEDS OF PEOPLE.

• Because ALL resources, goods, and services are limited – WE MUST MAKE CHOICES!!!!

CHOICE..CHOICE..CHOICE….

Why Choices?

We make choices about how we spend our money, time, and energy so we can fulfill our NEEDS and WANTS.

What are NEEDS and WANTS?

VS.

• NEEDS – “stuff” we must have to survive, generally: food, shelter, clothing

• WANTS – “stuff” we would really like to have (Fancy food, shelter, clothing, big screen TVs, jewelry, conveniences . . . Also known as LUXURIES

Wants and Needs, Needs and Wants

TRADE-OFFSWHEN YOU GIVE UP OR SACRIFICE ONE PRODUCT OR ANOTHER.

You can’t have it all (SCARCITY – remember?) so

you have to choose how to spend your money, time, and

energy. These decisions involve picking one thing

over all the other possibilities – a TRADE-OFF!

• What COULD you have done instead of coming to school today?

• These are all Trade-Offs!

THE COST OF TRADE OFF IS

OPPORTUNITY COST.

OPPORTUNITY COST =

The Value of the Next Best ChoiceEx: Sleeping is the opportunity cost of studying for a test)

THE VALUE OF ALTERNATIVE GIVEN UP TO OBTAIN ANOTHER ITEM.

• This is really IMPORTANT – when you choose to do ONE thing, its value (how much it is worth) is measured by the value of the NEXT BEST CHOICE.– This can be in time, energy, or even

MONEYIf I buy a pizza…

Then I can’t afford the movies…

Q: What is the opportunity cost of buying pizza?

PEOPLE NEED TO MAKE ANINTELLIGENT DECISION BY EXAMINING THE AVAILABLE ALTERNATIVES TO SATISFY THE UNLIMITED NEEDS AND WANTS.

KNOWLEDGE OFSPECIFIC FACTS

LOOP THE WORD /NAME THAT IS BEING IDENTIFIED. IT CAN BE DIAGONAL, HORIZONTAL OR VERTICAL.Page 8, B

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

A X E S S U C I M O N O C E O S

R K A R L M A R X Q E L S R E K

I D A N I O B H E M U I A M I I

S W E A T N I K R A K E Y N E S

T A N A E C O N O M I C S A R N

O Y L E R N A C H I T M I N H N

T P H Y S I O C R A T S T C A M

L S C I M O N O C E O R C I M Y

E U S A D A M S M I T H G N I K

AS A STUDENT HAS P60.00 ALLOWANCE.HE WILL SPEND THE MONEY FOR HIS SNACK AND PLAYING COMPUTER GAMES. ASSUMING THE BISCUITS FOR SNACK COST P5.00 WHILE PLAYING COMPUTER GAMES IS P15.00 PER HOUR.

ANALYSIS

COMBINATION A3 BISCUITS X P5.00 = P15.003 COMPUTER GAMES X P15.00 = P45.00

= P60.00COMBINATION B6 BISCUITS X P5.00 = P30.002 COMPUTER GAMES X P15.00 = P30.00

= P60.00

CHOOSE THE BEST COMBINATION

1. EXPLAIN THE BEST ALTERNATIVE.2. WHAT WILL BE THE OPPORTUNITY COST AND

OPPORTUNITY BENEFIT OF THE BEST ALTERNATIVE?

1.COMB. A- because you were able to have 3 biscuits and 3 computer games.

2. My opportunity cost is 3 biscuits, the benefit is you can play computer games which you enjoy playing.

EXPLAIN

WHICH STATEMENT IS MORE APPROPRIATE “ ECONOMICS SHAPES EH WORLD AROUND YOU” OR “ YOU SHAPE THE WORLD THROUGH ECONOMICS” ?

“ ECONOMICS SHAPES EH WORLD AROUND YOU”, IN THE SENSE THAT ECONOMICS GIVES COLOR AND IS ALWAYS A PART OF OUR DAILY ROUTINE.

EXPLAIN

WHY ARE SCARCITY AND CHOICE THE CENTRAL CONCEPTS IN ECONOMICS?

SCARCITY AND CHOICE THE CENTRAL CONCEPTS IN ECONOMICS BECAUSE PEOPLE LEARN TO MAKE A CHOICE AND DECICE ON THINGS, AS A RESULT OF SCARCITY. IT DESCRIBES HOW PEOPLE SURVIVE IN THIS WORLD.