Introduction%20to%20Economics

1
Introduction to Economics

• Welcome to AP Economics!

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ECONOMICS
3
The World Resources
People

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Why do we need Economics?

• Resources are SCARCE
• People have Unlimited Wants Needs
• FORCES
• 3) Society to allocate resources

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Formal Definition of Economics

• The social science of how society allocates
  scarce resources among unlimited wants and needs.

End of Day 1
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• Economics is the social science of how a society
  allocates their scarce resources among unlimited
  wants and needs.

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Economic Systems

• All economic systems allocate scarce resources
• Society must choose both a political economic
  system

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3 Types of Economic Systems

• MARKET
• COMMAND
• TRADITIONAL

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There is NO Free Lunch

• Nothing is free in economics
• People face Trade-offs in all decision making
• Decisions have both

-Opportunity Costs Opportunity Benefits
-Short Run and Long Run implications
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2 Types of Costs
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Marginal Analysis

• Economic Decisions are made at the Margin
• Marginal Benefit vs. Marginal Cost
• Value of next unit consumed or produced
• Rational people make decisions where MB MC

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Marginal Benefit Worksheet
Total Earnings Total Cost High
School 800,000 0 Associate 1,200,000 25,0
00 Bachelors 2,000,000 100,000 Masters 2,1
00,000 200,000 Doctorate 2,500,000 2,500,0
00
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Trade-off Analysis
Should I go to college?
Opportunity Benefit
Opportunity Cost
Explicit Cost?
Implicit Cost?
Long Run? Short Run?