Unit 1: Basic Economic Concepts and Economic Indicators

What Is Economics?

-Economics is a social science …why? -studies how rational individuals, groups, and

organizations behave and manage scarce resources

- Greek for ….- “manage a household” - Think of your own “household economic

decisions”

The Dismal Science

• A term coined by Scottish writer, essayist and historian Thomas Carlyle …

• to describe the discipline of economics. • The term dismal science was inspired by T. R.

Malthus' gloomy prediction that-• population would always ……• grow faster than food, dooming mankind to

unending poverty and hardship.

Macroeconomics vs. Microeconomics

• Microeconomics • examines the behavior of ….• Individual households and firms • and their decisions to supply and

demand goods and services

• Macroeconomics ???• analyzes the …• entire economy and issues affecting

it, • including unemployment, inflation,

economic growth, and monetary and fiscal policy.

• Micro – think “SMALL” - • individual choices individual markets• Why did people begin to Demand more i-phones?• As opposed to Macro – think “BIG” - • things that affect everyone and everything • Why did the unemployment rate fall last

month?

• Economic analysis may be applied throughout society, as in business, finance, health care, and government, but also to such diverse subjects as crime, education,the family, law, politics, religion, social institutions, war, and science.

• At the turn of the 21st century, the expanding domain of economics in the social sciences has been described as economic imperialism.

1st Assignment

• Find an article that examines ECONOMICS in one of the fields listed below:

• health care crime• education family• law politics• religion social institutions• war science

1st Assignment

• Print the article• Read the article • highlight key ideas that show how economics

is related to the topic chosen. • TYPE – two paragraph summary (each

paragraph = min. 5 sentences) (min of 10 sentences total)

Intro to Basic Economic Concepts: The Foundation of Economics

Scarcity, Tradeoffs, Opportunity Costs

SCARCITY• Your definition-• Your ideas of what is scarce – • Definition:….. • the limited availability of a good/resource in a

particular region• Is Air Scarce? • Is Clean Air Scarce? • …..so scarcity leads to …………..• tradeoffs and opportunity costs

• Tradeoffs• - in order to gain 1 of x, give up some of you must …..• Give up some of Y • Opportunity costs• -the value of the next-highest-valued alternative

use of that resource. • The “cost” of choosing x is to give up y• If, for example, you spend time and money

going to a movie, you give up…….? • Opportunity to go to work and earn money• The true “COST” of the movie would include…• the money you could have earned ….

• Or ….another example ..you give up ….? • If, for example, you spend time and money

going to a movie…..you give up…….? • the value of the next-highest-valued

alternative use of that resource.• Opportunity to study for your exam and you

end up failing.• The true “COST” of the movie includes your

test score

• If there were no SCARCITY, would there be tradeoffs or opp. costs?

• ….so without scarcity, there would be no ..• decisions to make• ….so there would be no study of ……• Economics

Reasons for ScarcityYour thoughts…..What is Scarce? 1. Depletion of natural resources– Harvesting of resources outpaces….. – the replacement of these resources (mining, fishing,

logging, etc.)– Increase in demand – often caused by an increase in

population or production 2. Human population growth increases the need for certain resources, such as food/water

• Basic Supply and Demand : • Rise in demand for products can lead to….• its scarcity in the market ….think of examples?

***“Supply can not always keep up with Demand” ***