StandardSSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.

Economic Way of Thinking1. Economics explains

how people interact within markets to get what they want or accomplish certain goals.

2. Economics is a driving force of human interaction.

3. Studying it reveals why people /governments behave in particular ways.

Key ConceptsOpportunity Cost

Economists main concern = opportunity cost = the best alternative we give up when we make a decision or choice.

Economic decisions are more or less—not yes or no—choices.

Key ConceptsPeople choose for good reasons

People will choose alternative that benefits them the most.

Weigh costs and benefits

Voluntary Exchange (trade):

When a person agrees to participate in a transaction (trade) because it makes them better off.

Key ConceptsIncentives Matter

Drives ChoicesWhen incentives change, people’s behavior changes in predictable ways.

“Free gift with purchase”

Earn a 100 as a grade for being on-time

Key ConceptsEconomic Systems

Economic systems = created to influence choices and incentives

Society is governed by written and unwritten rules that are the core of an economic systemPriceTrade/BarterBehaviorSocial interactionLaws

Key ConceptsPeople Gain from Voluntary Trade

People trade when they believe the trade makes them better off

People gain from voluntary trade.

Trade creates wealth. When two people trade

voluntarily, they give up something they value less for something else they value more.

Rational Decision MakingWhen marginal benefits

equal or outweigh marginal costs

Key ConceptsEverything has a cost

There is no such thing as a free lunch

Every action has a cost

Key ConceptsEconomics is marginal thinking

Marginal (meaning additional) choices = the effects of additions and subtractions from current conditions.

Key ConceptsUnintended Consequences

Economic actions create secondary effects.

Sometimes these effects are not always good.

One action can create many unintended consequences.

Key ConceptsValue of Goods/Services are affected by choices

Goods and Services do not have intrinsic value

value is determined by preferences of buyers and sellers

What do we exchange?Goods: an item that satisfies an economic want

Services: A work performed for someone by someone else

Who Exchanges Good and Services?

Consumer: A person who buys or uses goods to satisfy an need or want

(aka., buyer)

Producer: Someone who makes a product for others

(aka., seller)

SCARCITY?Not being able to have all the goods and services you want

Because resources are limited, people must choose some things and give up others

Or