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AND SOME BASIC CONCEPTS
““Be anxious for nothing, but Be anxious for nothing, but in everything by prayer and in everything by prayer and
supplication with supplication with thanksgiving, let your thanksgiving, let your
request be made known to request be made known to God; and the peace of God God; and the peace of God
which surpasses which surpasses understanding will guard understanding will guard
your hearts and minds your hearts and minds through Christ Jesus …”through Christ Jesus …”
Phil 4:6-7 Phil 4:6-7
OBJECTIVESOBJECTIVES
Review lessons 1 & 2 – www.econ & 3-1 subject (science, social science & arts)
Discuss your answers to the Question - Why do we have to make a choice?
Understand and apply basic economic concepts of
1. scarcity2. opportunity cost3. marginal costs and benefits 4. externalities
Define economics
3 BENEFITS OF STUDYING 3 BENEFITS OF STUDYING ECONOMICSECONOMICS
Learn a new WAY of thinkingUnderstand WHAT’S going onUnderstand the WHYs of
government policies and actions
WWW.econ
MICROECONOMICS
MACROECONOMICS
2 Branches/ Fields 2 Types of Analyses
Positive“What is, was,
will be”
Normative“What ought
to be?”
SCIENCE
SOCIAL SCIENCE
ART“Applied
Economics”
3-1 Discipline
ANG SAGOT SA TANONG…
WHY DO WE HAVE TO MAKE A CHOICE?
To reach a goal /move forward/ bring change in life /Give us purpose in life/give us a good future and a better life
& success
Gift of God/ We have the freedom/right to choose/ inevitable/ to make us responsible & independent persons/ choices reflect
our values or morals/ you can not have it all/everything
To know what is wrong or right and learn from them/live with The consequences of decision/Be on the right track/ path
GOAL – Attend classes
today
You CAN NOT DO ALL These activities
At the same time!
Our TIME is LIMITED or
SCARCE
ECON_FACT 1
SCARCITY OF RESOURCES FORCES US TO MAKE A CHOICE!
Scarcity is knowing that life is this __ OR that __ (Yes!) and not this__ AND__ that (X)
ECON_FACT 1
WHY are resources scarce? finite resources < infinite human wants
Limited goods & services < unlimited human wants
The same resources can not produce equally the same number of different goods at the same time
SCARCITY IS THE BASIC ECONOMIC PROBLEM
SPEND MONEY
MONEY ISNEVER
ENOUGH…ALWAYSSCARCE!
SAVE MONEY
Economics is… Economics is…
RESOURCES
OPTION 1
OPTION 2
OPTION 3
GOALS
Science of scarcity Science of efficiencyStudy of how society manages its scarce resources
ECONOMIC TOOLS IN MAKING CHOICES
OPPORTUNITY COST
EXTRA BENEFITS VS EXTRA COST OR THINKING AT THE MARGIN
THINKING OF THE UNINTENDED CONSEQUENCES
INCENTIVES
PEOPLE FACE PEOPLE FACE TRADEOFFTRADEOFF
The exchange of one thing for another or more or less equal value to effect a compromise
To get one thing, we usually have to give up another thing
Making decisions requires trading off
one goal against another
OPPORTUNITY COSTOPPORTUNITY COST
The cost of something given up in order to obtain a good
The next best alternative that is forgone when we make a decision or a choice
Cost of the tradeoff is called
OPPORTUNITY COST
LOOKING THROUGH THE EYES LOOKING THROUGH THE EYES OF SCARCITY…OF SCARCITY…
Choosing one over the other course of action would cost you to give up the next best alternative
LET’S IDENTIFY THE TRADEOFFS & LET’S IDENTIFY THE TRADEOFFS & OPPORTUNITYOPPORTUNITY COSTCOST OF THE FF. OF THE FF.
1. COLLEGE EDUCATION
2. EARLY MARRIAGE
3. PUTTING UP A BUSINESS
4. WORKING OVERSEAS/ABROAD
GROUP WORK
FAMOUS COLLEGE DROPOUTSFAMOUS COLLEGE DROPOUTS
KOBE and LEBRON gave up college education to earn millions as a basketball player.
Because of high opportunity cost of college education, Britney Spears & Sharon Cuneta gave it up for show business!
ECONOMIC WAY OF THINKING means…
Always thinking of the OPPORTUNITY COST OF
THE DECISION!
MARGIN means EXTRA OR ADDITIONAL
THINKING AT THE
MARGIN?
COST VS. BENEFITS…PLUS (+) COST VS. BENEFITS…PLUS (+) AGAINST MINUS (-)AGAINST MINUS (-)
COST AND BENEFITS AND DECISION MADE AT THE MARGIN
Marginal means additional or extra
Extra BENEFITS > Extra COSTS EXTRA advantages should be MORE THAN
the EXTRA disadvantages
STUDENT THINKING OF SHIFTING TO OTHER COURSE
EXTRA OR MARGINAL BENEFITS
EXTRA OR MARGINAL COSTS
EXTRA /MORE INTERESTS IN STUDY
EXTRA TIME TO BE IN CSB
EXTRA YEARS/ TIME TO FINISH THE NEW COURSE
EXTRA MONEY FOR TUITION & BAON
DELAY IN WORKING AND EARNING
MORE PASSION IN FUTURE WORK OR BUSINESS HENCE MORE FUTURE INCOME
I WILL SHIFTIF THE
EXPECTED MARGINAL
BENEFITS ARE GREATER THAN THE EXPECTED MARGINAL
COSTS!
A SECOND GLASS…?YES
EXTRA OR MARGINAL BENEFITS
Quench my thirst a second time
Good for cleansing my body of toxins
Replenish lost water in body
NO
EXTRA OR MARGINAL
COSTS
Bloat my stomach
Make me pee
Add weight for a while
(E)MB< (E)MC (E)MB > (E)MC
ECONOMIC WAY OF THINKING means…
Choosing the action or things that will give more
extra or marginal benefits
UNINTENDED CONSEQUENCESUNINTENDED CONSEQUENCES
Thinking in terms of unintended effects…
EXTERNALITY – the impact of one’s actions on the well-being of other people.
Impact may be positive or negative A cost or a benefit that is not included
in the price of a good
Positive and Negative Externalities
The effects of a decision by consumers and producers that has an impact on a third partyPositive Externalities – beneficial
effects on third partiesNegative Externalities – costs incurred
by third parties
EXTERNALITIES = Market Failures
ALCOHOL MISUSE1. Benefits Private benefits to the user Positive externalities2. Costs Private costs to the user Negative externalities
EXTERNALITIES = Market Failures
EDUCATION+Positive Externalities
- Negative Externalities
HAVING EDUCATION WILL BRING MORE POSITIVE EXTERNALITIES/EFFECTS!
SCARCITYSCARCITY & + AND - EXTERNALITIES & + AND - EXTERNALITIES
POSITIVE EXTERNALITY NEGATIVE EXTERNALITY ASSIGNMENT
SEPT 27 ;1 YELLOW PADQUIZ 1
A. DISCUSS THE LINK BETWEEN 1. SCARCITY AND UNLIMITED WANTS2. SCARCITY AND CHOICE3. SCARCITY AND COMPETITION
B. LIST 5 + & - EXTERNALITIES 1. SEATBELT LAW2. PROHIBIT THE USE OF PLASTIC BAGS3. SMOKING CIGARETTES
