Transcript Economic Decision Making

Block 1 Class Instructions
1) Grab a classwork from the tray in right side of the room
(look for the green sign)
2) Sit at your assigned seat
3) Begin working on your bellwork
Block 2 Class Instructions
1) Grab a classwork from the tray in right side of the room
(look for the green sign)
2) Sit at your assigned seat
3) Begin working on your bellwork
Block 4 Class Instructions
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(look for the green sign)
2) Sit at your assigned seat
3) Begin working on your bellwork
Anyone new to the class?
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Agenda
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Bellwork
Economic Decision Making Notes
Auction
Application Questions
Exit Ticket
HW- Syllabus Parent Signature
Essential Question
• What is the problem of scarcity and what
does economics study?
ECONOMIC DECISION
MAKING
Part 1
People make economic choices all the
time.
Why do we make decisions???
Scarcity

A situation where there aren’t enough resources to meet wants
Challenge Question!
1. How might scarcity impact prices?
Strategies for dealing with scarcity


Scarcity exists because people’s wants are greater
than resources
Higher prices are one strategy for dealing with
scarcity
 Raising
prices limits the number of customers who can
actually buy the product
 Higher prices mean people will buy it less often
 Example:
Gold
Scarcity’s other impacts
Scarcity affects what goods and services (G&S) that can be
produced
 Good- Thing that can be purchased
 Service- a person that works for another
Challenge Question #2
2. Determine whether the following is a good or service.
A. Xbox
B. Teeth Cleaning
C. Manicure
D. Tablet
Economics- the study of how individuals, businesses, and
nations can best allocate (distribute) their limited resources
In other words- studies how people choose to use scarce resources
Personal
Economic
Choices
Business
Decisions
Government
Economic
Choices
Microeconomics
The study of economic behavior and decisionmaking by smaller units of the economy (such as
individual households and business firms.)

Examines how decisions affect pricing and the supply
and demand of goods and services.

Macroeconomics

The study of the behavior of the economy as a
whole
 Can
be an overview of the regional, national, or global
economy
 Used by governments and industries to
 predict
trends
 identify economic growth
 help define social issues related to economic circumstances.
 Ex.
Unemployment trends, inflation (general rise in
prices)
What we will be studying…
Micro
1.
2.
3.
Opportunity Cost &
Production Possibility
Curves
Supply and Demand
Market Structures

4.
Macro
Monopolies, corporations, etc
Role of Government

Taxation and Gov’t spending to
correct market failures
5.
6.
7.
8.
Gross Domestic Product,
Inflation, Unemployment,
Poverty
Money, stocks & bonds
Fiscal and Monetary Policy
Trade and Comparative
Advantage
Challenge Question #3-4


If you are analyzing the average national income of
Americans, are you studying microeconomics or
macroeconomics?
If you are studying why Wal-Mart discontinued the
sale of particular type of cookware are you studying
microeconomics or macroeconomics?
What influences economic decisions?

Three factors determine someone’s decision to do or
buy something
 Positive


incentives (benefits/ rewards)
Cleaning your room  go to a movie
Creating a savings account  earn interest on your money
 Negative


No homework  get a bad grade
Miss work  Lose my job
 Utility

incentives (costs/ penalties)
(usefulness)
How often will I wear this
shirt if I buy it?
People make economic choices all the
time.

People try to make the best decision through a
cost-benefit analysis
 make
decisions according to what you believe is the
best combination of costs and benefits

Formal definition- systematic approach to estimating the strengths and
weaknesses of alternatives that satisfy transactions, activities or functional
requirements for a business.
Making a Rational Economic Decision

People make rational economic decisions when the marginal benefits
outweigh the marginal costs
Marginal benefit- amount of benefit a person receives once the cost of
the decision is discovered
 Marginal cost- the cost of the decision once weighed against the benefits
If the benefits are greater than the cost, it is a rational economic decision


Challenge Questions 5-7
Example: Tom and Marissa are on a date at a football game. At halftime, Tom
rushes to the concession stand to beat the rush. Marissa told Tom she would like
a pretzel but Tom is also really thirsty and wants a soda. Tom only has $2,
which isn’t enough for both. What should he do?
5.
What are the marginal benefits of buying Marissa a pretzel?
6.
What are the marginal costs of buying Marissa a pretzel?
7.
Which option do you think Tom will choose to buy? Is this a rational
economic decision?
Decision-Making: Evaluate your alternatives
through tradeoffs and opportunity cost

Tradeoff-the alternative people give up when they make
choices

Ex: If you are going for a night out with your friends


A: Go to the movies
B: Go to dinner


If you take B (dinner) the tradeoff is A (movie), or vice versa.
Opportunity cost- the value of something that is given up
to get something else that is wanted.


If you select B, the opportunity cost is seeing your favorite
actor
If you select A, the opportunity cost is the nourishment of the
meal you gave up
Application
Frank is faced with a decision. He can either buy a $60 textbook
or a new video game for $50. Frank really wants the video
game, but he needs the textbook to study. What should he do?
Option A- He buys the textbook

What is his tradeoff?


What is the opportunity cost?



The video game
The fun he could have had playing the video game
$10 he could have saved (monetary opp cost)

if he had chose the video game instead, he could play it, and
have $10 left over since the game is cheaper than the book
How did utility impact his decision to buy the textbook?

The textbook was useful to him because Frank needed it to study
Auction
Item
Price
Auction
Application Questions
Gas Article Questions
1. Scarcity and shortage are not exactly the same
thing but they are similar. While scarcity generally
considered a permanent lack of something, shortage
is a temporary lack of a good or service. Is this article
about a scarcity or shortage?
2. What caused this lack of supply of gasoline?
3. Name two effects of this lack of gasoline.
On your own paper


Draw a picture of something that is scarce
OR
Write a story about how you have been impacted
by the problem of scarcity