Economics: The Dictionary Definition

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Economics The Dictionary Definition

• "Economics is a social science which examines how
  people choose to use limited or scarce resources
  in attempting to satisfy their unlimited wants."

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Economics Our Definition

• Economics is the science of decision-making!!

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Economics Our Definition

• Economics is the science of decision-making!!

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Economic Way of Thinking

• Economists make assumptions about human behavior
  we will call an economic way of thinking
• Assumptions
• People have to make choices
• Those choices are constrained
• People choose at the margin
• People choose rationally
• Economic Way of Thinking is reflected in the
  Handy Dandy Guide to Economic Mysteries

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Fundamental Economic Problem

• Scarcity is at the heart of the study of
  economics!
• Without scarcity problem--no need to make
  decisions!
• Things people want are in limited quantities
• OUR UNLIMITED WANTS gt
• LIMITED RESOURCES
• You cant always get what you want..
• --Mick Jagger, noted economist

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Shopping Spree Activity

• collect old newspaper ads and have students cut
  out goods they want but dont have
• In groups, paste these on a sheet of paper or on
  the bulletin board...
• Ask Why dont we have these things?
• What is scarce that prevents us from having these
  goods?
• Money
• Time, other resources..

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Oh, Scarcity (from the Econ Song Book)

• (sung to Oh, Christmas Tree)
• Oh, scarcity! Oh, scarcity!
• We can't have all the things we want.
• Oh, scarcity! Oh, scarcity!
• We cannot have it all.
• We really want a lot of stuff.
• But sometimes there's just not enough.
• Oh, scarcity! Oh, scarcity!
• We cannot have it all.

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• There is no such thing as a free lunch.
• --famous economic saying

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• What if you.
• offer to take me to lunch,
• pay for my meal,
• even drive me to and from the restaurant.!
• Isnt my lunch free now?
• Why not..?
• ALL CHOICES INVOLVE COSTS!
• (HDG Statement 2)

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Opportunity Cost

• Opportunity Cost Benefit you would have gotten
  from the next best alternative
• not the cost of all possible alternatives!
• We trade-off one alternative for another...
• We give up the opportunity to choose the other
  alternative
• Opportunity cost of being here today?

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Oh, Give Me a Choice (Sung to Home on the Range)

• Oh, give me a choice,
• Oh, a difficult choice,
• And I'll think about what I could use,
• I'll have to decide,
• With my eyes open wide,
• What I'll give up and what I will choose.
• Opportunity cost!
• It's the thing you give up when you choose.
• It's the price that is paid
• When a choice must be made.
• It's the thing that I surely will lose.

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3 Types of Productive Resources

• Also called "natural resources
• gifts of nature
• These occur without human intervention
• Examples?

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3 Types of Productive Resources

• Also called Human Capital"
• The quality and quantity of human effort required
  to produce a good or service
• Primarily acquired through education/training
• greater human capital ? higher wages
• Example airline pilots

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3 Types of Productive Resources

• Goods (or services) used in the production of
  other goods and services
• Any technology resources
• e.g. tools or machines factories
• Other Examples?