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Economic Foundations for Civics Teachers
Gus A. Stavros Center for Economic Education
Dr. James Gwartney ([email protected])Dr. Joe Calhoun ([email protected])
Dr. Joab Corey ([email protected])
August 16, 2011
Section 1
Basic Elements of Economics
1000 1500 1813 1870 1913 1950 1973 2003$0
$5,000
$10,000
$15,000
$20,000
$25,000
Global Economic Growth
WestWorld
Year
GD
P P
er
Cap
ita
in 1
99
0 I
nte
rnati
on
al D
ollars
1000 1820 1900 1950 20030
10
20
30
40
50
60
70
80
Global Life Expectancy
WestWorld
Year
Lif
e E
xp
ect
an
cy a
t B
irth
in
Years
The story of wealth and health for 200 countries over 200 years
6
Everyone Responds to Incentives!
Incentives matter: choice is influenced in a predictable way by changing incentives
ex. Money Gameex. Killer Seatbeltsex. Prices
7
Everyone Responds to Incentives!
This economic principle influences all people
Students
Politicians
Altruists
Criminals
8
There is No Such Thing as a Free Lunch
Because resources are scarce, trade-offs must be made.
Opportunity Cost: The highest valued alternative that must be sacrificed when choosing an option
Even if it is free to you, it is not free to society!
9
There is No Such Thing as a Free Lunch
Opportunity Cost:
“With every choice you risk the life you would have had; with every decision, you lose it.” – Richard Bach
10
Voluntary Trade Promotes Economic Progress
Because the value of a good or service is subjective, voluntary trade moves goods from people who value them less to people who value them more
Ex. The Candy Game
Trade also leads to specialization, innovation, and peace!
11
Prices bring the choices of buyers and sellers into balance
Buyers prefer to buy things for lower prices Sellers prefer to sell things for higher prices
Market prices brings these two conflicting forces into balance.
12
Profits direct businesses toward activities that increase wealth
A profit occurs only when the value of the good produced is greater than the value of the resources used for its production.
Losses are penalties imposed on those who produce goods that are valued less than the resources required for their production
The Process of Wealth Creation
ResourcesLandLaborRaw
MaterialsTime
Entrepreneurs:People who make,
combine, and arrange resources
to create new goods and services
Consumer Goods and Services:
PizzaHaircuts
TelevisionsCell Phones
14
The invisible hand directs people toward activities that promote the
general welfareThe Invisible Hand Principle: The
tendency for people, while pursuing their own interests, to promote the economic well-being of society.
The invisible hand directs people toward activities that promote the
general welfare
End of Section 1….Enjoy your Break!
Thank You!
