Economics 12405 www'msu'edumilewsk6

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Economics 1/24/05 www.msu.edu/milewsk6

• OBJECTIVE First day of school administrative
  stuff.
• I. Welcome Back ?
• II. Attendance
• III. Distribution of
• -syllabus
• -textbooks
• IV. Homework

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Estrada, Erik 03-224

• New text

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Important Stuff

• Web-site
• www.msu.edu/milewsk6
• Homework Due Friday
• 1.) Book covered
• 2.) Syllabus signed and returned
• 3.) -Read Ch1 sec1 p.4-10
• -Answer questions (3-6) p.10
• 4.) Read Ch1 sec2 p.12-17
• -Answer questions (3-6) p.17

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Economics 1/25/05www.msu.edu/milewsk6

• OBJECTIVE Examine the fundamental economic
  problem.
• I. Journal 1 pt. A
• -Read The Global Economy p.9
• -Answer questions (1-3) p.9
• II. Journal 1 pt. B
• -notes on the fundamental economic problem
• III. Homework (due Friday)
• 1.) Book covered
• 2.) Syllabus signed and returned
• 3.) Read Ch1 sec1 p.4-10
• -Answer questions (3-6) p.10
• 4.) -Read Ch1 sec2 p.12-17
• -Answer questions (3-6) p.17

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The Fundamental Economic problem is

• Scarcity - the condition that results from
  society not having enough resources to produce
  all the things people would like to have.
• Economics - the study of how people try to
  satisfy what appears to be seemingly unlimited
  competing wants through the careful use of
  relatively scarce resources.

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Need v. Want

• Need - a basic requirement for survival
  includes food, clothing, and shelter.
• Want - a way of expressing need.

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Scarcity

• Since people have unlimited wants limited
  resources, scarcity leads to choices.
• 1.) What to produce?
• 2.) How to produce?
• 3.) For whom to produce?

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The Factors of Production

• LAND the gifts of nature
• LABOR people with all their efforts abilities
• CAPITAL the tools, equipment, machinery, and
  factories used in the production of goods
  services
• ENTREPRENEURS a risk taker in search of profits
  who does something new with existing resources

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Goods Services

• Goods - an item that is economically useful or
  satisfies an economic want
• Services - work that is performed for someone
• Consumer a person who uses goods services

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Economics 1/26/05www.msu.edu/milewsk6

• OBJECTIVE Examine the different types of goods
  and the circular flow of economic activity.
• I. Journal 2 pt. A
• -Read the Business Week Newsclip p.11
• -Answer questions (1-2) p.11
• II. Journal 2 pt. B
• -notes on the different types of goods the
  circular flow
• III. Quiz on Types of Goods
• -durable, non-durable, consumer, and capital
• Rowing Meeting Today After School

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Types of goods

• Consumer good intended for final use by
  individuals (personal computer, dishwasher)
• Capital good manufactured goods used to produce
  other goods (robot welder, oven in a bakery,
  computer in a H.S.)
• Durable goods a good intended to last 3 years
  or more when used on a regular basis (can be both
  a consumer good or a capital good)
• Nondurable good a good that lasts less than 3
  years (food, notebook, shampoo)

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Goods v. Services

• The difference between goods and services is that
  a good is tangible, services are not.

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Value, Utility, Wealth

• Paradox of Value some necessities like water
  have little monetary value, whereas some
  non-necessities, like gold, has a much higher
  value.
• Scarcity is not enough to create value. It must
  have utility.
• Utility the capacity to be useful and provide
  satisfaction.

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Wealth

• So, for something to have value it must be scarce
  and have utility.
• Wealth the accumulation of those products that
  are tangible, scarce, useful, and transferable
  from one person to another.
• A nations wealth are determined by the total
  amount of its peoples skills (Adam Smith) plus
  its natural resources, capital equipment,
  stores, houses, and all other tangible assets.

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The Circular Flow p.15

• The Market a location or other mechanism that
  allows buyers and sellers to exchange a certain
  economic product.
• Factor Markets where productive resources are
  bought and sold.
• Product Markets where producers sell their
  goods and services to consumers.

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Economics 1/27/05www.msu.edu/milewsk6

• OBJECTIVE Examine economic choices and decision
  making.
• I. Journal 3 pt. A
• -Read the Profiles in Economics p.18
• -Answer questions (1-2) p.18
• II. Journal 3 pt. B
• -The Production Possibilities Frontier
• III. Journal 3 pt. C
• -questions on Econ U.S.A. episode1 (film)

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Homework Due Tomorrow!

• 1.) Book covered
• 2.) Syllabus signed and returned
• 3.) Read Ch1 sec1 p.4-10
• -Answer questions (3-6) p.10
• 4.) -Read Ch1 sec2 p.12-17
• -Answer questions (3-6) p.17

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Adam Smith

• He is the father of Modern Economics
• He wrote the Wealth of Nations in 1776
• In it he said that governments need to stay out
  of the economy as much as possible. laissez-faire

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The Invisible Hand

• People and business operate in their own
  self-interest.
• Competition acts like an invisible hand which
  will allocate resources to ONLY their most
  productive uses.
• Example- if Milewski automotive made cars that
  exploded after 3,000 miles nobody would buy these
  defective autos.
• The company would go out of business freeing up
  the
• -labor used to make the cars
• -land used in the cars (steel, glass, etc)
• -financial capital invested in the company
• Thus, making these factors of production
  available to other productive and efficient
  automakers.

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Division of Labor

• Division of Labor work is arranged so
  individuals do fewer tasks than before.
• Specialization factors of production perform
  tasks more efficiently than others.
• Human Capital the sum of the skills, abilities,
  health, and motivation of the people.

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Production Possibilities Frontier

• PPF is a diagram that represents various
  combinations of goods and/or services an economy
  can produce when all productive resources are
  fully employed.
• Opportunity Cost the cost of next best
  alternative use of money, time, or resources when
  one choice is made rather than another.
• P.23

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Econ U.S.A. episode 1

• Please answer the following questions
• 1.) Why were Americans standing in long lines
  for gas during the 1970s?
• 2.) Why did Congress debate the fate of the
  Alaskan Wildlife Refuge?

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Economics 1/28/05 www.msu.edu/milewsk6

• OBJECTIVE Examine the production possibilities
  frontier.
• I. Journal 4 pt. A
• -answer the question to the caption on p.21
• II. Journal 4 pt. B
• -notes on trade-offs, opportunity costs, the
  PPF
• III. Journal 4 pt. C
• -Short Film on Entrepreneurs Competition
• NOTICE Chapter 1 Test Thursday

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Trade-offs Opportunity Costs

• Trade-offs alternate choices
• Opportunity costs the cost of the next best
  alternative use of money, time, or resources when
  one choice is made rather than another.

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Alternate choices in Mr. Milewskis Class

• Example I have two passes for the quarter. If
  I dont use them, I get 25 extra credit points.
  If I use one pass I get 10 extra credit points.
• Question What is the opportunity cost of using
  a pass in Mr. Milewskis class?

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Graphing Choices

• Passes Extra Credit
• Remaining Lost
• 2 0
• 1 15
• 0 25

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TINSTAAFL

• There is no such thing as a free lunch
• Other terminology
• Inverse relationship as one number goes up, the
  other number goes down
• Direct relationship as one number goes up, so
  does the other number.

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Small Business Film Questions

• 1.) Who is the entrepreneur of this short film?
• 2.) What is his business?
• 3.) What game does the entrepreneur suggest be
  played instead of the waiting game?
• 4.) Who is the entrepreneurs competition?
• 5.) What type of business organization do the
  rivals decide to form?