Chapter 1
The
Economic Way of Thinking
Section One Economics and Choice
Why is Economics Important?
1. _______________________
2. _______________________
3. _______________________
What is Economics? (brainstorm)
Economics
Means
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Economics
is the Science of Choices
The Basic Economic Problem
Scarcity is the condition that occurs
because peoples wants and needs are unlimited, while the resources needed to
produce goods and services to meet these wants and needs are limited.
Use the
following chart to record your answers.
List your unlimited wants and needs and then list the limited resources
used to fulfill these wants and needs.
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Scarcity |
Unlimited Wants/
Needs
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Limited Resources
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Definition of Economics
Allocation
the process of choosing which needs will be satisfied and how much of our
resources we will use to satisfy them.
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Allocation of the Homework
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How do we allocate goods and services in the
U.S.?
Are all
resources allocated using priced based methods?
Definition
of Economics
Economics is the social science that deals
with how society allocates its scarce resources among its unlimited wants and
needs.
Section
Two
Opportunity Costs and Benefits
Read page 8 Focus story
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What
Maria gave up |
What
Maria Gained |
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What
Teresa gave up |
What Teresa Gained
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Opportunity Cost is the value of any alternative that
you must give up when you make a choice.
Opportunity Benefit is what is gained by making a
particular choice.
Every economic choice has an opportunity
benefit and an opportunity cost. When
you make an informed choice, you compare the opportunity benefit with the
opportunity cost.
Needle Exchange Program Activity
Section 3
Basic Economic Questions
There are two types of choices made in a
society.
1.
_____________________
2.
_____________________
Economics
therefore, is divided into two separate branches that deal with these two basic
types of choices
Economics
Microeconomics Macroeconomics
1. Microeconomics examines the choices of
individuals
2. Macroeconomics examines the behavior of the whole economy at
once.
Three Basic Economic Questions Some countries make
many more social decisions than others because of how their systems of
government are designed. Other
countries conduct most of their economic affairs through individual decision
making (U.S.).
Regardless of
the amounts of social and individual decision making in an economy, all
societies use some combination of social and individual decisions to answer
three basic economic questions.
1.
What to Produce? In the United States is made by
.
2.
How to Produce?
¨ capital intensive vs. labor intensive
¨ Coal miners example
3.
For Whom to Produce?
¨ Will every citizen get the same
quality and amount of goods and services?
or will there be any differences?
¨ In the United States how is this question
decided?
Section 4 Economic
Systems
The way that a society answers these
questions determines the kind of economic system it will have.
Economic Systems is the combination of social and
individual decision making it uses to answer the three economic questions.
There are
four basic economic systems:
¨ Traditional
economies - ??? are
decided by social customs.
¨ Market
economies - ???are
decided mostly by individuals in the marketplace.
¨ Command
economies - ??? are
decided by the government.
¨ 
Mixed
economies - ??? are decided by a combination of market decision making and
government order.
Market Economies and Economic Questions
Consumers cast
votes by spending money in the marketplace.
Producers of the products consumers want most are awarded with
profits.
Profits are
the difference between the cost of producing a product and the price consumers
will pay for it in the market. Each producer
has a strong reason to economize, (use resources wisely), and buy the right
amounts of each resource.
Budget
constraints the mix of goods that can be purchased, given a limited amount of
income.