Intro to Economics Smartboard Lesson

Introduction to Economics
BR1
Mr. Raposo
KCSS
Course: CIA 4U1

Slide 1
BR1
This is an excellent lesson to construct a mind map on the white board with.
Brian Raposo, 07/03/2007

Agenda
•Textbook distribution
•Student Agenda
•Course Syllabus
•If you had a million dollars? Activity
•What is Economics?
•Class Activity: Scarcity, choice and
opportunity cost

If I had a million dollars!
•Rapid writing
•1 minute
•What would you buy?

Question:
•Same list: how much of that could you buy
right now??

Basic Economic Problem
•Humans have unlimited needs/wants!

Consumers obtain/use various
goods and services ………..

….and these goods and services
give them satisfaction (utility)

Satisfaction-Rolling Stones

Utility: (economists term for pleasure or
satisfaction)

Here’s the Problem!
•Society has limited resources to satisfy our
unlimited human wants
•These resources are natural, capital,
human and entrepreneurial (factors of
production)

The Pie is not large enough for all of us to
get our fill.

..this results in Scarcity!!!!!

Humans must make choices!

…making choices have costs!

Game Plan
•Introduce www.kcssbiz.com
•Re-cap “The Economic Problem”
•Opportunity Cost-Small Group Activity
•Buying on Credit-Activity
•Exit Card
•HW Begin Chapter 1 from course outline

Opportunity Cost (what is given up, or the
next best choice)

Question:
•What is the cost (opportunity cost) of
attending this class??????

Economic Choice
• Economists assume that economic
decision-makers maximize their own utility.
◦Decision-makers must keep in mind the
opportunity cost of each alternative.
◦Opportunity cost is defined as the utility of the
best forgone alternative.

Choice and Scarcity
•Choices must be made given our limited
resources among alternatives.
•Since resources are limited in supply and
fully employed, any increase in the
production of one product will require
resources to be shifted away from the
production of another product.

Economics Defined:
• Economics is the study of how society
distributes its limited resources given
its unlimited needs and wants.

Class Activity
• Scarcity and Choice
Example situation: Suppose someone you know has $80 in her
bank account until her next pay cheque in two weeks’ time. She
finds herself facing the following scenarios:
• her supervisor at work has informed her that she is
responsible for purchasing a new uniform immediately and it
cannot be bought on credit ($30.00)
• a class trip has been planned at school and the money is due
tomorrow ($50.00)
• her friends want her to join them for a concert of her
favourite band this coming weekend ($120.00)
• she really needs some new jeans to wear to the concert
($60.00)
• her cell phone bill is past due ($80.00)

Exit Card
• This is an example of someone with unlimited
wants, but limited resources.
1. Describe an example of an economic problem
in your life, whereby you were faced with
unlimited wants, but limited resources.
2. How did you go about maximizing utility based
on your choice of actions?
3. Describe the opportunity costs you experienced
as a result of your choices.

Micro vs Macro: We will look at both!
◦Microeconomics focuses on individual
consumers and businesses.
◦Macroeconomics is a broader or
national view of an economy.

Positive vs. Normative Statements
Positive Statements
•scientific (or factual) statements about
economic behavior
•concerned with “what is”
Normative Statements
•value based statements
•concerned with “what should be”

Examples:
•Positive Statement: The unemployment rate
in eastern Canada is 18% (hypothetical)
•Normative Statement: The unemployment
rate in Canada should be reduced from
18%
•Economists are concerned with positive
statements: “what is”.
•Policy makers (government) decide “what
should be”

Factors of Production: Societies Limited
Resources
• Natural Resources
• Capital Resources
• Human Resources

Economic Models
• Economic models:
◦simplify economic reality
◦show how dependent variables are affected by
independent variables
◦include inverse and/or direct relationships
◦incorporate a variety of assumptions such as
ceteris paribus
◦are classified as part of either positive
economics or normative economics

Glossary: Let’s Begin!
Title a new page-glossary, Unit 1, today’s
date and define the following terms (Ch.1)

The Basic Economic Questions
• There are three basic questions any
society must answer:
◦what to produce ?
◦how to produce ?
◦for whom to produce ?

Economic Systems
• The three economic systems
◦Traditional economy
◦Market economy
◦Command economy

Types of Market Systems

Economic Systems
• Most countries have mixed economies.
◦Modern mixed economies include both private
and public sectors.
◦Traditional mixed economies combine
traditional sectors with private and/or public
sectors.

Economic Systems

Gallery Walk
•Instructions:
•You will be given one sticker for each
piece of flip chart paper around the room.
•Place one (only one) sticker on each chart
paper on the paper area that represents
your answer
•Example:

Economic Goals
• There are seven major economic goals:
◦economic efficiency
◦income equity
◦price stability
◦full employment
◦viable balance of payments
◦economic growth
◦environmental sustainability

Complementary and Conflicting
Economic Goals
• Economic goals may be complementary.
◦An example is the relationship between full
employment and economic growth.
• Economic goals may be conflicting.
◦An example is the relationship between price
stability and full employment.

The Production Possibilities Model
• The production possibilities model is
based on three assumptions:
◦an economy makes only two products
◦resources and technology are fixed
◦all resources are employed to their fullest
capacity

The Production Possibilities Curve
• The production possibilities curve shows a
range of possible output combinations for
an economy.
◦It highlights the scarcity of resources.
◦It has a concave shape, which reflects the law of
increasing opportunity costs.

The Production Possibilities Curve
Production Possibilities
Schedule
Banana’s Automobiles point
on graph
2000 0 a
1600 1 b
900 2 c
0 3 d
Production Possibilities Curve
a
2000
b f unattainable
1600
Banana’s
c
900
e
inefficient
d
0 1 2 3
Automobiles

The Law of Increasing Costs
Production Possibilities Schedule
Bananas Opportunity Automobiles point
Cost of on graph
Automobiles
2000 0 a
100
1600 1 b
400
900 2 c
900
0 3 d
Production Possibilities Curve
a
Bananas
2000
b
1600
900
c
d
0 1 2 3
Automobiles
As the quantity
of automobiles
rises, so does their
opportunity cost.

Shifts in Production Possibilities
How can this economy gain more automobiles and banana’s?
Production Possibilities Curve
Bananas
2000
Through improved
technology or
better education
this economy
can gain more of
both goods
(represented by
a shift of the
PPC outward
and to the right).
0 3
Automobiles

The Founder of Modern Economics
• Adam Smith:
◦Explained how
specialization of labour
increases production
◦laissez faire (leave it
alone), argued that
government should not
intervene in economic
activity
◦The “invisible” hand
lead by self interest will
result in economic gain
and efficiency in
markets