Does Economics Relate to My Life

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Does Economics Relate to My Life?
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Economics is the science of telling you things
youve known all your life, but in a language
you cant understand.
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Rote Learning

• Involves verbatim memorization
• (which is easily forgotten)
• Cannot be manipulated or applied to novel
  situations
• (e.g. remembering phone numbers, dates, names,
  etc.)

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Meaningful Learning

• Learning that is tied and related to previous
  knowledge and integrated with previous learning
• Can be manipulated, applied to novel situations,
  and used in problem solving tasks
• (e.g. using basic math skills acquired in the
  5th grade to calculate the percentage change,
  determine the impact of a public policy decision
  to impose a new tax on gasoline).

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This pyramid depicts the different levels of
thinking we use when learning. Notice how each
level builds on the foundation that precedes it.
It is required that we learn the lower levels
before we can effectively use the skills above.
Blooms Taxonomy
Evaluation
Graduate School
Making decisions and supporting views requires
understanding of values.
Combining information to form a unique product
requires creativity and originality.
Synthesis
Identifying components determining arrangement,
logic, and semantics.
Analysis
Undergraduate
Using information to solve problems transferring
abstract or theoretical ideas to practical
situations. Identifying connections and
relationships and how they apply.
Application
Restating in your own words paraphrasing,
summarizing, translating.
Comprehension
High School
Memorizing verbatim information. Being able to
remember, but not necessarily fully understanding
the material.
Knowledge
Louisiana State University ? Center for Academic
Success ? B-31 Coates Hall ? 225-578-2872 ?
www.cas.lsu.edu
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Example Blooms Levels of Learning Applied
to Opportunity Cost
Adapted from http//www.kyrene.k12.az.us/schools/
brisas/sunda/litpack/BloomsCriticalThinking_files/
v3_document.htm
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Introduction to Economics

• Objective
• Introduce Fundamental Economic Concepts
• Opportunity Cost
• Marginal Analysis

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Introduction to Economics

• List everything in life that is free
• By free what I mean is that everyone can have
  as much as they want at zero price. (There is no
  cost to anyone)

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Introduction to Economics
Economics is the study of how you, me and other
rational human beings make choices.
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Introduction to Economics

• Every choice has a cost a trade off.
• Rational decisions are made by comparing the
  expected benefit with the the expected cost.

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Introduction to Economics
All choices involve the use of one or more
resources.

• The economic value of a resource is determined
  by the opportunity cost of that resource.

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Introduction to Economics
Economics is the study of how human beings decide
how to use available resources to supply goods
and services demanded by the population.
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Introduction to Economics

• Resources Classified
• Land (all natural resources)

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Land
Soil, Air, Water, Minerals, etc.
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Introduction to Economics

• Resources Classified
• Land (all natural resources)
• Labor (physical, mental, entrepreneurial)

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Labor
Physical, Mental, Entrepreneurial
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Introduction to Economics

• Resources Classified
• Land (all natural resources)
• Labor (physical, mental, entrepreneurial)
• Capital (physical, financial)

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Capital
A good used to produce some other good or service
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Introduction to Economics
Money is sometimes referred to as capital. For
clarity sake we will refer to this as financial
capital.
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Introduction to Economics

• The economic value of a resource is determined
  by the alternative uses of that resource.

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Introduction to Economics

• The best alternative use of a resource that is
  not chosen is called the opportunity cost
  Identify the opportunity cost in the following
  examples.

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Opportunity Cost
What are the alternative uses of this land?
Grow Corn
Construct a factory
Lease to Wal-Mart
Would these choices have different expected
benefits and costs?
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Alternative Uses of Labor?

• What are the alternative uses of this resource?
• Shrimp man
• Factory worker
• Accountant
• Actor
• Etc.

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Alternative Uses of Labor?

• The opportunity cost to attend this class is the
  same for you and your classmates?

True
False
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Alternative Uses of Capital?

• What are the alternative uses of this building?
• Family residence
• Lease to business
• College bookstore
• Convert to other uses

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So, what do we conclude from this discussion of
opportunity costs?
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Theres No Such Thing As A Free Lunch!
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Theres No Such Thing As A Free Lunch!
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Theres No Such Thing As A Free Lunch!
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Introduction to Economics

• List everything in life that is free
• By free what I mean is that everyone can have
  as much as they want at zero price. (There is no
  cost to anyone)
• How many things remain on your list?

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Introduction to Economics
Every choice has costs and benefits. A rational
decision maker chooses by comparing the expected
cost with the expected benefit.
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Introduction to Economics
Economics attempts to explain how rational
choices are made using cost and benefit analysis
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Introduction to Economics
Choices are made at the margin buy one more,
make one more, attend the next econ class etc.
The cost and benefit associated with a choice is
thus called the marginal cost or marginal
benefit.
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Introduction to Economics
Choices made at the margin do not consider costs
that have already been incurred, or benefits
already received only new costs and new
benefits matter.
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Introduction to Economics
Costs that have already been incurred and cannot
be recovered are called sunk costs.
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Introduction to Economics
Stock 1 (cost 20) Stock 2 (cost 10) You
need to sell one these and the current price of
both stocks is 15. Which one do you sell? Assume
that there are no tax implications
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Macro versus Micro
Macroeconomics looks at the big economic picture
and how the overall economy performs
GDP
Inflation
Recession
Unemployment
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Macro versus Micro
Microeconomics deals with the behavior of
markets producers, consumers, investors, and
workers that make up the markets
Managing Costs
Profit
Productivity
Consumer Choices
Prices and Output
Competition
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Does Economics Relate to My Life?
Economics is the study of how decisions are made
in society. Since you are affected by the choices
made, it is fair to say that economics relates to
your life.
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Does Economics Relate to My Life?