Module 1 by mtPjMYC

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									MODULE 1
   The study of economics, while
   personally beneficial, is
   academic and theory-based
How to learn economics
   The study of economics is cumulative. You should master
    each topic as it is presented because later topics build on
    earlier topics.

    Pay attention to new vocabulary and make sure you
    know, understand, and can apply these terms as they are
    used in economics
   On a daily basis, identify questions you have about the
    material and seek out answers by returning to your text, your
    lecture notes, your classmates, or your teacher. DO NOT fall
    behind or you will likely stay behind.
As you begin your study of economics, keep in mind that
you need to adapt your approach to fit the unique nature of
the discipline. You will be learning THEORY that has been
studies over time and been documented to usually hold
true.

Do not draw conclusions about theory based on what
you heard from other sources such as the adults in
your life and the media.
GENERALIZATIONS
   Theory, law, principle, or model?
     often reflect degrees of confidence
     use in economics is determined by
      convenience or custom
CAUSATION vs. CORRELATION
   CORRELATION: variables are often observed
    together in a pattern (income and education)

   CAUSATION: one variable is the cause of
    change in the other variable (price and
    quantity)

   Do not assume one or the other – you will
    experience both in this course
ECOMONIC RESOURCES
   Resources (factors) used to create (produce) the
    goods and services people want or need
   Also called:   factors of production, and
                        productive resources
     Land
     Labor
     Capital (physical capital, investment goods)
     Entrepreneurship*


       NOT MONEY!!!!
    ********SCARCITY*********

   NEVER FORGET THAT OUR LIMITED
    (SCARCE) ECONOMIC RESOURCES ARE
    THE BASIS FOR THE STUDY OF
    ECONOMICS!
   There are not enough economic resources
    to meet our unlimited needs and wants
   Choices must be made
CHOICES
   Trade offs: all of the opportunities you did
    not take when you made your choice
   Opportunity cost: the “runner-up”
    opportunity sacrificed when you made
    your decision
   TINSTAAFL
Marginal Analysis
   Cost vs. benefit analysis: what is gained
    from the economic activity vs. what it costs

   “Marginal” – status quo plus one more
Basic Economic Questions
• What to produce
• How to produce it
• For whom is it produced (how is it
  allocated once it is produced)
Types of Economic Systems
   Traditional

   Market/Capitalism

   Command

   Mixed (most modern economies are mixed)
Market Economy (Capitalism)
 Free enterprise
 Self-Interest
 Competition
 Profit motive
  (incentive)
 Laissez-faire (free
  choice; minimal govt)
 Private ownership of
  property (capital)         Adam Smith
                        Wealth of Nations 1776
 “Invisible hand”
                        “Father of Capitalism”
RESOURCE PAYMENTS
   LAND earns rent

   LABOR earns wages

   CAPITAL earns interest

   ENTREPRENUERSHIP earns profit
       TOTAL REVENUE - TOTAL COSTS = PROFIT


   R + W + I + P= INCOME
US ECONOMIC GOALS
   ECONOMIC GROWTH*
   FULL EMPLOYMENT OF RESOURCES
     LABOR

     CAPITAL

   ECONOMIC EFFICIENCY (Micro)
     PRODUCTIVE  EFFICIENCY
     ALLOCATIVE EFFICIENCY

   PRICE- STABILITY
   BALANCE OF TRADE

								
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