Do Now, Please.

Please, go to your google

classroom ID # upexxjd
Make sure that you are
registered with the class.
 And..

■ Please, go to
https://myap.collegeboard.org/
Your AP classroom ID # NQWJV2
Make sure that you are
registered with the class.
First Pop Quiz –OMG!!!!!!

“Do You Think Like an Economist?”

We have (10) ten True or False questions

that should take no more than (5) five
minutes. Please Post your answers in the
Zoom Chat.

(Relax, this will not be “graded”)

First Pop Quiz –OMG!!!!!!

“Do You Think Like an Economist?”

We have (10) ten True or False questions

that should take no more than (5) five
minutes. (Relax, this will not be “graded”)
First Pop Quiz –OMG!!!!!!

“Do You Think Like an Economist?”

We have (10) ten True or False questions

that should take no more than (5) five
minutes. (Relax, this will not be “graded”)
First Pop Quiz –OMG!!!!!!

“Do You Think Like an Economist?”

If you answered…

FALSE to every question you are RIGHT!

Why Study Economics?

● I don’t know?
● Easy A+!
● Looks good on my college resume!
● My friend is taking the class!
● My Mom/Dad made me!
● I’m just here for the AP credit!
Mr. Carlson what is a Conan?
Conan’s biggest regret at Harvard?
Skipping economics
BOSTON (AP) – Conan O’Brien was a prankster during his
Harvard years, but he also credits his success to hard work in
the classroom. The late-night TV host spoke to an audience
of Harvard University students on Friday about the value of a
liberal-arts education and about his time at the Ivy League
school…

Asked about his biggest regrets, O’Brien said he still kicks

himself for shying away from an economics class because it
intimidated him. “That was knowledge that I don’t have, and
I’ve always regretted it, “ he said. “I wish I had taken that
course.”

--Associated Press, 2/13/2016

Daily Bell Ringer – Day 2
▪ Which is more important to survival
– diamonds or water?

▪ Which is more expensive and why?

▪ Are either of them scarce? Why

such a big price difference?
 Welcome to The Economic
Way of Thinking
■ People choose for good reasons.
■ Everything has a cost. (Nothing is free!)
■ Incentives matter. (What motivates you?)
■ People create economic systems to influence choices
and incentives.
■ People gain from voluntary trade.
■ Economic thinking is marginal thinking.
■ The value of a good or service is affected by people’s
choices.
■ Economic actions create secondary effects.
■ The test of a theory is its ability to predict correctly.
Chapter 1
Limits, Alternatives, and
Choices
Microeconomics vs.
Macroeconomics
■ Micro – part of economics concerned
with individual units such as firms and
consumers. (The view from Daeichi Street)

■ Macro – part of economics concerned

with the economy as a whole. (The view
from the space shuttle)
Economics is…
■ The study of how people satisfy
their needs and wants by making
choices under conditions of scarcity.
Scarcity and Choice
■ Resources are limited – as a society
and as individuals we must make
choices
Provide some examples of
Scarcity here in Korea?
■ Real quick in the Google classroom
stream.

■ Provide to the class (2) two

examples of Scarcity/ or what you
may think believe to be scarce?
Opportunity Costs & Trade-offs
■ The amount of other products/services
which must be forgone or sacrificed to
obtain a unit of product/service
■ “There is no such thing as a free lunch”
■ NFL or TINSTAAFL
■ Cost = “give-up”
■ Should I sleep?
■ Should I study?
Marginal Analysis

• Economists measure the effects of unit

changes, asking “what’s one unit
more?” (Incremental thinking)
• Marginal Cost – the cost of producing
one additional unit of a product
• Law of Diminishing Marginal Utility—
the satisfaction of consumption declines
(eventually)
Daily Bell Ringer – Day 3
■ Today’s FRQ: Now that you’re starting
to think economically: Why should we
care about economics?

■ (Try and use terms and examples

that you’ve learned in class.)
Other Things Equal
Assumption
■ “ceteris paribus”
■ Latin for "all other things being equal."
■ Economic models examine two
variables. Everything else is constant
■ Dependent and Independent variables
■ Think cause & effect!
■ Price & Quantity or Income &
Consumption
■ Which is the dependent variable?
Correlation
■ Dependable association between two
variables
■ Correlation does not always indicate
causation!!
■ X increases, Y increases, X may not
cause Y although there may be a
correlation
■ X = educational level, Y = income, X
may not cause Y
“The Economizing Problem”
1) Resources are limited (scarce)
2) Wants are unlimited (insatiable)

The study of economics will begin to

explain how this problem is resolved or
minimized…
 Resource Categories “LLC”
(Resources are also called “factors of production”
or “factors”)

1. Land – all natural resources “gifts of nature”

arable land, forests, oil, etc.

2. Labor— “human resources”

3. Capital – manufactured aids to production i.e.

tools, machinery, factories, trucks, technology
(Money is not considered a capital resource!)
Resources (cont.)

■ Consumer goods vs. Capital goods

■ Consumer goods satisfy human wants directly while
capital goods aid in the production of consumer
goods and other capital goods
■ 4. Entrepreneurial Ability –four factors
separate the entrepreneur from traditional
labor:
■ takes the initiative
■ makes policy decisions
■ source of innovation
■ risk bearer = no guarantee of profit
Can you name some famous
Entrepreneurial brands?
Investment refers to the purchase of
capital goods. i.e. “Investment in plant
and equipment”

1) Property Resources: land and capital

2) Human Resources: labor and

entrepreneurial ability
Be Warned…
 Production Possibilities Curve
Model (PPT/PPC)

■ There are four assumptions in this model

■ 1. Full Employment
■ 2. Fixed Resources
■ 3. Fixed Technology
■ 4. Two Goods
 Production Possibilities Table

■ “Farmland”: Possible combinations of Tractors

and Bread utilizing all available, known resources
A B C D E
Tractors 0 1 2 3 4
Bread 20 18 14 8 0

■ At any point in time, a full employment/full

production economy must sacrifice some of
product X to get more of product Y
 Production Possibilities Curve
■ Graph it—(You do, I do, We do) Get used to drawing lots of graphs!
■ Producing outside the curve is infeasible.
■ Producing inside the curve is feasible but
undesirable or not optimal.
■ Producing ON the curve is productively
efficient (max use of resources,) not
necessarily allocatively efficient (the Q
society desires of each) [lots more on this in micro!]
Production Possibilities Curve
■ A model of trade-offs and opportunity
costs.
 Let’s look more closely…
What’s the opportunity
cost of producing more
tractors?

How does society choose

to allocate scarce
resources?

What if we changed the

axis labels to “guns” or
“butter?” (We will visit this
shortly)
Law of Increasing
Opportunity Costs
■ As production of a particular good
increases, the opportunity cost of
producing an additional unit also
increases, (give up more of Y to get one more X.)
■ Rationale: Resources are not completely
adaptable to alternative uses!
■ This explains why the curve is concave
to the origin (bows out from the origin)
 Production Possibilities Table

■ “Safety or Security”: Possible combinations of

Guns and Butter utilizing all available, known
resources
A B C D
Butter 100 50 90 60
Guns 30 120 115 60

■ At any point in time, a full employment/full

production economy must sacrifice some of
product X to get more of product Y
Classic Trade-off: Guns or Butter
Guns = defense; butter = social welfare
 How does this model show
■ Efficiency—all pts. on
the curve! FRONTIER
Using all available
resources.
■ Underutilization—any
point under the curve!
■ Law of Increasing
Costs—as society moves
toward one axis (eg. B to
C to D,) it must give up
more and more of the
other axis
Growth over time
Trade-off between living for
today or investing for
tomorrow (the ant and the
grasshopper)

How do we get from B to C?

--new technologies
--additional resources
 Optimal Allocation: MB=MC
■ What combination of Guns and Butter
should be produced?
■ ...it depends on society’s desires and
values.
■ Optimal output occurs where
■ (MC)marginal cost = (MB)marginal benefit.
■ General rule: as output increases,
■ MB (-)declines while MC (+)increases…
Economic Growth and PPC
■ The growth of economic capacity can
be depicted as an outward shift in PPC.
■ Increases in resource supplies and
improvements in technology are two
factors that enable a PPC to shift
outward.
■ PPC may also contract (war, natural
disaster)
Daily Bell Ringer – Day 4
■ Would you see this Movie?
■ Why or Why not?
■ Think Economically…
Present Choices Impact the
Future
■ A production alternative favoring capital
goods will enable the economy to grow
more in the future as compared to an
alternative favoring consumer goods.
Economic Goals
All market economies
have (3) three primary
goals!
Economic Growth (1)
■ Measured as a percentage increase in Gross
Domestic Product (GDP)
■ GDP measures the total value of all final
goods and services produced within the US
■ C+I+G+XN
■ Recession – defined by the National Bureau
of Economic Research as “a significant
decline in economic activity lasting more than
a few months normally visible in real GDP”
Full Employment (2)
■ Jobs for all willing and able to work
■ There will always be some unemployment
■ The current unemployment rate is . . .
Price Level Stability (3)
■ Policy makers want to control inflation
■ The most common measure used to gauge
inflation is the Consumer Price Index (CPI),
which measures a market basket of goods and
services
■Fiscal and Monetary
Policy are used to achieve
the goals of economic
growth, full employment,
and price level stability
Fiscal Policy
■ Changes in taxes and/or government
spending in order to influence the economy
■ Enacted through Congress and President
Monetary Policy
■ Actions of the Federal
Reserve which alter interest
rates (fed funds rate) and
influence the economy
■ Decreasing interest rates are
intended to stimulate
economic growth and
employment while increasing
rates are used to control
inflation
Other generally accepted
goals include

■ Economic Efficiency
■ Economic Freedom
■ Economic Security
 Study for Ch1 Quiz
■Your Quiz will be this
Reminders: by Mr. Carlson
1. Society’s wants are unlimited, but ALL resources
Friday.
are limited (scarcity).
2. Due to scarcity, choices must be made. Every
choice has a cost (a trade-off).
3. Everyone’s goal is to make choices that maximize
their satisfaction. Everyone acts in their own
“self-interest.”
4. Everyone acts rationally by comparing the
marginal costs and marginal benefits of
every choice
5. Real-life situations can be explained and analyzed
through simplified models and graphs.