EconomicsInstructor: Mr. Sheehan

Let’s Get Started

Do Now: You are at a grocery store that has several checkout lanes open. It is a

crowded day, and people are in every line. What lane would you choose when you checkout? Bullet point your thought process on a sheet of paper. You have 2 minutes

Objectives: Be able to answer the question – What is Economics? Define and Understand: Scarcity, Opportunity Cost, and Marginal

Analysis Go Over the Syllabus

Do Later: Actively read and take notes on the 1st half of Chapter 3 Hand in your answers to the Production Possibility Curve and Marginal

Analysis questions

What is Economics?

Economics – is the study of how people choose to allocate their scarce resources

Three common elements of Economic Models: Scarcity Opportunity Cost Marginal Analysis

Scarcity

Scarcity – people wanting more than can be satisfied with available resources A good is scarce if another unit of the good would

benefit someone. The good is scarce if when price of the good is zero (it is free) the quantity people demand (wants) exceeds its supply.

Are the following goods scarce? Fresh Air Monster Drinks Money Time

Opportunity Cost

Opportunity Cost – value of the best alternative that had to be forgone in order to undertake a given course of action. The value of the best forgone alternative use This emphasizes that had people not made the choice they did,

they would have chosen the next best alternative

Example: If Hyde decides to hire two new teachers for three Positions:

teaching Biology, teaching Linear Algebra and teaching Intro to Native American studies. The biology class has a value to the school of $200,000, L.A. has a value of $100,000 and INAS has a value of $20,000.

Which two teachers does Hyde Choose? What is the Opportunity Cost of the teachers chosen?

What are the trade-offs?

Production Possibility Curve

Chairs Benches

Time Spent (hour

s)

Product Made

Time Spent (hour

s)

Product

Made

0 0 4 20

1 4 3 18

2 7 2 14

3 9 1 8

4 10 0 0

Efficiency

Economic Growth

PPC – show trade-offs people face because of the scarcity of resources

Marginal Analysis

Process of determining which goods SHOULD be produced to use resources most effectively.

Determine if Benefit from producing one more unit is greater than the cost of that unit, you should. Net Benefits = Total Benefits – Total Costs

Example: Should a firm Produce More? A firm’s net benefit of being in business is its profits. The

following formula illustrates how profits are calculatedProfits = Total Revenue – Total Costs

International Widget is producing 50 widgets at a cost of $50,000 and is selling them for $60,000. If it produces a 51st unit, its total sales (total revenue) will be $62,000 and its total cost will be 51,500. Should the firm produce the 51st unit?

Do Later:

Create a Production Possibility Curve for the following data. What would be the most efficient use of your time?

International Widget is producing 50 widgets at a cost of $50,000 and is selling them for $60,000. If it produces a 51st unit, its total sales (total revenue) will be $62,000 and its total cost will be 51,500. Should the firm produce the 51st unit? If so, Why?

English Reading

History Reading

Time Spent

(hours)

Pages Read

Time Spent

(hours)

Pages

Read

0 0 4 6.5

1 2 3 6

2 3 2 5

3 4 1 3

4 5 0 0