1. The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw correct conclusions. (From: The General Theory of Employment, Interest, and Money)

2. { 3. Is there ever a time when all your desires are met? 4. What Economics is Economics is a social science, attempting to study people, their behavior, and the choices that they make. Textbook Definition: Economics is the study of how human beings coordinate their wants and desires, given the decision- making mechanism, social customs, and political realities of the society. Mr. Hs Definition: 1.) What to produce. 2.) How much to produce. 3.) How to produce it. 4.) Who to produce it for. social science 5. Basic ideas of Economics 6. 1.) Resources are Scarce. Basic ideas of Economics Land Labor Capital entrepreneurship - the quantity available is not large enough to satisfy all productive uses and all of peoples desires. 7. { 8. { 9. { 10. { 11. { 12. { 13. { 14. Scarcity An example A society that has 500 children is threatened by a disease that strikes only children. A medical company has made a pill that reduces the chances of getting the disease from 90% to only 10%. The company is only able to produce 300 pills right now. If parents can get more than one pill it reduces the chance of their child dying by even more. How do you allocate the pills? How do you decide who gets pills? 15. 2.) Trade - Offs The big trade off in society is between efficiency and equality. - Making decisions requires trading one thing for another 1.) Resources are Scarce. Basic ideas of Economics - the quantity available is not large enough to satisfy all productive uses and all of peoples desires. 16. Trade - Offs There is no such thing as a free lunch you don't get something for nothing 17. { 18. { 19. { 20. { 21. { 22. { 23. { 24. { 25. 1.) Resources are Scarce. Basic ideas of Economics 2.) Trade - Offs - Making decisions requires trading one goal for another. 3.) Opportunity Costs - The real cost of something is what you must give up to get it.The next one not all of them 26. Everything Has a Value To an economist, everything has a value (you can put a value on anything) How much are the following worth to you? --- A pen. --- A coffee cup --- Your pet --- Your time --- Your finger --- A human life 27. { 28. { 29. { 30. { 31. Opportunity Costs Making decisions requires individuals to consider the benefits and costs of some action. What you must give up when you make a decision Ex: --- I decide to come here today. --- I decide to work on my lesson plans last night. --- I decide to spend time with my daughter. --- I decided to move to China. 32. 1.) Resources are Scarce. Basic ideas of Economics 2.) Trade - Offs 3.) Opportunity Costs - The real cost of something is what you must give up to get it. 4.) Marginal Thinking. - Means an additional one, the measurement from one unit to the next. How much? is a decision at the margin. (the very last unit, not of everything) 33. { 34. { 35. { 36. { 37. { 38. { 39. { 40. { 41. { 42. { 43. { 44. { 45. { 46. { 47. { 48. { 49. Ex: Marginal Analysis Cans of soda Total Utility (U) Marginal Utility (MU) Total Cost (TC) Marginal Cost (MC) 0 0 0 1 5 1 2 8 2 3 10 3 4 11 4 5 11 5 6 4 6 The word Utility = Happiness 50. Cans of Soda Total Utility (U) Marginal Utility (MU) Total Cost (TC) Marginal Cost (MC) 0 0 -- 0 -- 1 5 5 1 1 2 8 3 2 1 3 10 2 3 1 4 11 1 4 1 5 11 0 5 1 6 4 -7 6 1 Ex: Marginal Analysis The word Utility = Happiness 51. What does Rational mean? What does mean to be Rational? 52. { It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest To be rational is also to be selfish and this is good for society. 53. 1.) Resources are Scarce. Basic ideas of Economics 2.) Trade - Offs 3.) Opportunity Costs 4.) Marginal Thinking. - Means an additional one, the measurement from one unit to the next. 5.) Rational Thinking People usually exploit opportunities to make themselves better off. 54. Mary is a lawyer, who charges 800RMB/hour for her time. John is a typist, who charges 100RMB/hour for his time. Mary types 100 w.p.m. John types 50 w.p.m. Mary has something that is going to take her 2 hours to type, and shes the faster typist. Should she hire John to type it, or should she do it herself (assume she doesnt get paid for time spent typing). Ex: Rational Behavior and Self-Interest 55. { 56. { 57. { 58. { 59. You are at a store about to buy a fancy new notebook. It costs 100RMB. Before you buy it, your friend calls from a store 30 minutes away, that is selling the same notebook for 50MB. Would you drive to the other store to get the cheaper price? Ex: Rational Behavior and Self-Interest 60. You are at a car dealership about to buy a new car. It costs 380,000RMB. Before you buy it, your friend calls from a car dealership 30 minutes away, that is selling the same car for 379,950RMB. Would you drive to the other store to get the cheaper price? Ex: Rational Behavior and Self-Interest 61. 1.) Resources are Scarce. Basic ideas of Economics 2.) Trade - Offs 3.) Opportunity Costs 4.) Marginal Thinking. 5.) Rational Thinking -People usually exploit opportunities to make themselves better off. 6.) Specialization Also related to Productivity - You do what you do best, others do what they do best, and everyone has more. 62. Adam Smith as a moral philosopher, was: to do nothing but observe everything In observing a pin factory he saw a key the wealth was the division of labor 63. Ways to interpret Economic theory Positive economics is the study of what is Normative economics is the study of what should be 64. Ways to interpret Economic theory Positive economics is the study of what is Normative economics is the study of what should be 65. { 66. What Economics is Economics is a social science, attempting to study people, their behavior, and the choices that they make. Textbook Definition: Economics is the study of how human beings coordinate their wants and desires, given the decision- making mechanism, social customs, and political realities of the society. Mr. Hs Definition: 1.) What to produce. 2.) How much to produce. 3.) How to produce it. 4.) Who to produce it for. 67. So what do we produce? 68. Everything 69. What do we produce? Chinas imports a lot of mineral fuel (oil), organic chemicals, iron and steel, ores, copper, cotton, and wood, cars, paper, medical instruments, plastics, machinery, electrical machinery, aircraft, cotton, food stuffs. USA imports a lot of office equipment, telecommunication equipment, clothes, furniture, shoes, cars, purses, iron, steel, paper products, toys, building supplies, clocks, watches, chemicals, and a bunch of random crap that breaks really easy. 70. We classify () what we make into different categories () (4 main categories) 71. 1.) Consumption goods and services Things We Produce: stuff bought by individuals and used to provide personal enjoyment and help make your life better. 72. 1.) Consumption goods and services Things We Produce: stuff bought by individuals and used to provide personal enjoyment and help make your life better. 2.) Capital goods goods bought by business to increase their productive resources 73. 1.) Consumption goods and services Things We Produce: 2.) Capital goods goods bought by business to increase their productive resources 3.) Government goods and services stuff bought by governments 74. 1.) Consumption goods and services Things We Produce: 2.) Capital goods 3.) Government goods and services stuff bought by governments 4.) Export goods and services stuff produced in one country and sold in other countries. 75. What Economics is Economics is a social science, attempting to study people, their behavior, and the choices that they make. Textbook Definition: Economics is the study of how human beings coordinate their wants and desires, given the decision- making mechanism, social customs, and political realities of the society. Mr. Hs Definition: 1.) What to produce. 2.) How much to produce. 3.) How to produce it. 4.) Who to produce it for. 76. So how do we produce? 77. We use Factors of Production to make things The things that we use to make other things are broken into 4 main categories too 78. Factors of Production How We Produce: 1.) Land natural resources from the earth 79. Factors of Production How We Produce: 1.) Land natural resources from the earth 2.) Labor Work time and effort used to produce stuff 80. Factors of Production How We Produce: 1.) Land 2.) Labor Work time and effort used to produce stuff 3.) Capital tools, instruments, machines, buildings, anything that is now used to produce goods and services 81. Factors of Production How We Produce: 1.) Land 2.) Labor Work time and effort used to produce stuff 3.) Capital tools, instruments, machines, buildings, anything that is now used to produce goods and services Human Capital knowledge and skills of people have and gain in making stuff 82. Factors of Production How We Produce: 1.) Land 2.) Labor 3.) Capital tools, instruments, machines, buildings, anything that is now used to produce goods and services 4.) Entrepreneurship the risk takers, business owners and people that take land, labor, and capital to produce things 83. What Economics is Economics is a social science, attempting to study people, their behavior, and the choices that they make. Textbook Definition: Economics is the study of how human beings coordinate their wants and desires, given the decision- making mechanism, social customs, and political realities of the society. Mr. Hs Definition: 1.) What to produce. 2.) How much to produce. 3.) How to produce it. 4.) Who to produce it for. 84. So for whom do we produce? 85. We make things for those that can buy things: That means people have to get money somehow and there are different ways to do this We break this up into 4 different categories as well so we can use them in equations later too 86. For Whom do we Produce: 1.) Rent income paid for the use of land We make things for those that can buy things: 87. For Whom do we Produce: 1.) Rent income paid for the use of land We make things for those that can buy things: 2.) Wages income paid for the services of labor 88. For Whom do we Produce: 1.) Rent We make things for those that can buy things: 2.) Wages income paid for the services of labor 3.) Interest income paid for the use of capital 89. For Whom do we Produce: 1.) Rent We make things for those that can buy things: 2.) Wages 3.) Interest income paid for the use of capital 4.) Profit (or loss) income earned by an entrepreneur for running a business 90. For Whom do we Produce: 1.) Rent We make things for those that can buy things: 2.) Wages 3.) Interest 4.) Profit (or loss) income earned by an entrepreneur for running a business *** 5.) Government add only because they demand different types of things that are produced. 91. What Economics is Economics is a social science, attempting to study people, their behavior, and the choices that they make. Textbook Definition: Economics is the study of how human beings coordinate their wants and desires, given the decision- making mechanism, social customs, and political realities of the society. Mr. Hs Definition: 1.) What to produce. 2.) How much to produce. 3.) How to produce it. 4.) Who to produce it for.