Orange Earth

The Economic Way of ThinkingDr. T. D. MitchellBonneville High School, Idaho Falls, Idaho1Scarcity: The Basic Economic ProblemPrinciple 1 People Have WantsPrinciple 2 Scarcity Affects EveryoneGoodsServicesConsumerProducerEconomics: Concepts and Choices, 2011. Holt McDougal

Scarcity: The Basic Economic ProblemScarcity Leads to Three Economic QuestionsWhat will be produced?How will it be produced?For whom it will be produced?Economics: Concepts and Choices, 2011. Holt McDougal

The Factors of ProductionEconomics: Concepts and Choices, 2011. Holt McDougalEntrepreneurshipEconomic Choices: Opportunity CostEconomics: Concepts and Choices, 2011. Holt McDougalMaking ChoicesIncentivesUtilityEconomize

Factors that help you make an economic choice:Motivations for choiceNo Free Lunch

Trade-Offs and Opportunity CostEconomics: Concepts and Choices, 2011. Holt McDougalMaking Trade-OffsCounting the Opportunity CostsAnalyzing ChoicesMarginal CostMarginal Benefits

Analyzing Production PossibilitiesEconomics: Concepts and Choices, 2011. Holt McDougalEconomic ModelsProduction Possibilities Curve (Frontier)AssumptionResources are fixedAll resources are fully employedTechnology is fixed

Review: Production Possibilities CurveEconomics: Concepts and Choices, 2011. Holt McDougal

What We Learn from PPCsEconomics: Concepts and Choices, 2011. Holt McDougalEfficiencyUnderutilizationLaw of increasing opportunities costs

Guns and Butter

9Changing Production PossibilitiesEconomics: Concepts and Choices, 2011. Holt McDougal10More on the PPC

Economics: Concepts and Choices, 2011. Holt McDougalEconomists ToolboxEconomics: Concepts and Choices, 2011. Holt McDougalStatisticsUsing economic modelsCharts and tables

Using Graphs

12Economists StudyEconomics: Concepts and Choices, 2011. Holt McDougalMacroeconomicsThe study of the whole economyMicroeconomicsThe study of the individual consumerUnits of StudyUnits of StudyEconomic GrowthEconomic StabilityInternational TradeConsumer MarketsBusiness MarketsLabor MarketsTopics of interestTopics of InterestMoney, Banking, financeGovernment Taxing and Spending PoliciesEmployment and unemploymentInflationMarkets, prices, costs, profits, Competition, Government RegulationsConsumer BehaviorBusiness Behavior

13Positive and Normative EconomicsPositive EconomicsA way of describing and explaining economics as it is, not as it should be.Involves verifiable facts, not value judgments.Normative EconomicsA way of describing and explaining what economic behavior ought to be, not what it actually is. Does not involve value judgments because it seeks to make recommendations for action.

Economics: Concepts and Choices, 2011. Holt McDougal14Adam Smith: Founder of Modern Economics250 Years ago, economics did not exist as an academic discipline.In 1776, Adam Smith changed all this.Born in Scotland, studied literature, logic, and moral philosophy.Wrote Wealth of Nations in 1776.Economic self-interestThe invisible handBecame the foundation of modern economics

Economics: Concepts and Choices, 2011. Holt McDougal