Chapter 1-What is Economics?

Lesson 1-Scarcity and the Science of Economics

• What effect do limited resources and unlimited wants have on the economy?

• Why does every society face scarcity?

• Examples of scarcity?

Wants Needs Durable Good Nondurable Good

ConsumerGood

Capital Good

• Paradox of value-why do diamonds have more monetary value than water?

• Adam Smith-Wealth of Nations-what is the role of the “invisible hand”?

• Critical Thinking questions on p. 9

1. What do you think is Smith’s central idea about what makes an economy function optimally?

2. Why do you think Smith had a negative view of monopolies as undermining the free market? How might Smith view today’s multinational corporations?

• Questions all societies must answer:

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Why do we study economics?

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TINSTAAFL

Chapter 1 Section 2-Our Economic Choices• Producers:

• Consumers:

• Factors of Production:•

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What would happen if one of the factors were missing?

List examples of Factors of Production at JMA:

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• Production Possibilities Curve:

• (The curve is the “frontier”)• Assumptions about PPC:

• The amount of all resources is fixed • All resources are fully employed• Only 2 things can be produced• Technology is fixed

• Analyze Figure 1.3 on p. 16• Why can production take place on or inside the frontier?• Why would a company choose to produce inside the frontier?

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• Opportunity cost:

• Trade-off:

• Analyze Figure 1.4 on p. 17

• If Alpha is producing 300 units of clothing represented by point a, and if it then decides to produce the amount of clothing at point c, what would be the opportunity cost in cars?

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College Tuition Trade-Offs

As many high school students approach graduation, they must weigh the trade-offs of attending college or immediately entering the workforce. In making the choice, high school graduates must weigh both the cost of attending college as well as the potential of earning power they will gain by getting a college education. According to the National Center for Education statistics, one year of tuition, room, and board for an undergraduate at a 4-year institution averaged $22,092 in 2011. However, the earning power of workers with a college degree is DOUBLE (or higher) than that of workers with a high school diploma or GED.

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• Consumerism:

• Consumer Rights:•

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• Consumer responsibilities

Chapter 1 Lesson 3-Using Economic Models

• Economic Growth: