DAY 0 PP Intro to Economics-wEconThought(1).ppt

DAY 0 PP Intro to Economics-wEconThought(1).ppt - Why are...

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Unformatted text preview: Why are you taking AP Econ? What is Economics? 2 separate classes Microeconomics (Fall) Macroeconomics (Spring) AP Tests Macro (May 14, PM) Micro (May 15, AM) Available on Blackboard Print and return last page Will discuss more next class Textbooks coming soon ... Principles of Economics (5th Edition) N. Gregory Mankiw Attendance/Tardies Food Phones Bathrooms Use only materials you’re given 10 minutes to plan and build Must be free-standing Must stand for 30 seconds Tallest structure wins Opportunity cost – The next best alternative that is given up Example: Larger bases = shorter tower Examples in your life? Scarcity – When desirable items are in finite supply Examples from the game? Examples in your life? Unlimited Wants Proble m of Scarcit y Limited Resources People – Labor Materials – Capital Place to build – Land Ideas and plans – Entrepreneurs 1. People Choose. 2. All choices involve costs. 3. People respond to incentives in predictable was. 4. Economic systems influence individual choices and incentives. 5. Voluntary trade creates wealth. 6. The consequences of choices lie in the future. Society faces an important tradeoff: efficiency vs. equality Efficiency: when society gets the most from its scarce resources Equality: when prosperity is distributed uniformly among society’s members Tradeoff: To achieve greater equality, could redistribute income from wealthy to poor. But this reduces incentive to work and produce, shrinks the size of the economic “pie.” TEN PRINCIPLES OF ECONOMICS 11 1. People Choose. 2. All choices involve costs. Making decisions requires comparing the costs and benefits of alternative choices. The opportunity cost of any item is whatever must be given up to obtain it. It is the relevant cost for decision making. TEN PRINCIPLES OF ECONOMICS 13 1. People Choose. 2. All choices involve 3. People respond to costs. incentives in predictable was. Incentive: something that induces a person to act, i.e. the prospect of a reward or punishment. Rational people respond to incentives. Examples: When gas prices rise, consumers buy more hybrid cars and fewer gas guzzling SUVs. When cigarette taxes increase, teen smoking falls. TEN PRINCIPLES OF ECONOMICS 15 1. People Choose. 2. All choices involve 3. People respond to costs. incentives in predictable was. 4. Economic systems influence individual choices and incentives. A market economy allocates resources through the decentralized decisions of many households and firms as they interact in markets. Famous insight by Adam Smith in The Wealth of Nations (1776): Each of these households and firms acts as if “led by an invisible hand” to promote general economic well-being. TEN PRINCIPLES OF ECONOMICS 17 1. People Choose. 2. All choices involve costs. 3. People respond to incentives in predictable was. 4. Economic systems influence individual choices and incentives. 5. Voluntary trade creates wealth. Rather than being self-sufficient, people can specialize in producing one good or service and exchange it for other goods. Countries also benefit from trade & specialization: Get a better price abroad for goods they produce Buy other goods more cheaply from abroad than could be produced at home TEN PRINCIPLES OF ECONOMICS 19 1. People Choose. 2. All choices involve costs. 3. People respond to incentives in predictable was. 4. Economic systems influence individual choices and incentives. 5. Voluntary trade creates wealth. 6. The consequences of choices lie in the future. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Because it is desirable, sunshine is scarce. Because it is limited, polio is scarce. Because water covers three-fourths of the earth’s surface and is renewable, it cannot be considered scarce. The main cost of going to college is tuition, room and board. If mass transportation fares are raised, almost everyone will take the trains anyway. You get what you pay for. If someone makes an economic gain, someone else loses. If one nation produces everything better than another nation, there is no economic reason for these two nations to trade. A nonregulated monopoly tends to charge the highest possible price. A business owner’s decision to show more care for consumers is a decision to accept lower levels of profits. All answers Why? are FALSE. Ten Principles of Economic s, 10th Anniversary Editio n - YouTube ...
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