Scarcity and choice 1st term 2011

THE ECONOMIC PROBLEM AND SOME BASIC CONCEPTS

“ Be anxious for nothing, but in everything by prayer and supplication with thanksgiving, let your request be made known to God; and the peace of God which surpasses understanding will guard your hearts and minds through Christ Jesus …” Phil 4:6-7

OBJECTIVES ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

3 BENEFITS OF STUDYING ECONOMICS ,[object Object],[object Object],[object Object],WWW.econ

MICRO ECONOMICS MACRO ECONOMICS 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 Taxonomy of Economics

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 Deep philosophical answers! Let us bring them to the world of economics...

GOAL – Attend classes today You CAN NOT DO ALL These activities At the same time! WHY? Our TIME is LIMITED or SCARCE

ECON_FACT 1 ,[object Object],[object Object]

ECON_FACT 1 ,[object Object],[object Object],[object Object],[object Object],SCARCITY IS THE BASIC ECONOMIC PROBLEM

SPEND MONEY MONEY IS NEVER ENOUGH… ALWAYS SCARCE! SAVE MONEY SCARCITY

Economics is… RESOURCES OPTION 1 OPTION 2 OPTION 3 GOALS SCARCE Science of scarcity Science of efficiency ,[object Object]

ECONOMIC TOOLS IN MAKING CHOICES OPPORTUNITY COST EXTRA BENEFITS VS EXTRA COST OR THINKING AT THE MARGIN THINKING OF THE UNINTENDED CONSEQUENCES INCENTIVES

Because resources are scarce… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],(Mankiw, 1988)

PEOPLE FACE TRADEOFF ,[object Object],[object Object],Making decisions requires trading off one goal against another

OPPORTUNITY COST ,[object Object],[object Object],Cost of the tradeoff is called OPPORTUNITY COST

LOOKING THROUGH THE EYES OF SCARCITY… ,[object Object]

LET’S IDENTIFY THE TRADEOFFS & OPPORTUNITY COST OF THE FF. ,[object Object],[object Object],[object Object],[object Object],GROUP WORK

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! What am I giving up for this choice?

MARGIN means EXTRA OR ADDITIONAL THINKING AT THE MARGIN?

COST VS. BENEFITS…PLUS (+) AGAINST MINUS (-) ,[object Object],[object Object],[object Object],[object Object]

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 SHIFT IF 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 Do I expect to benefit from this choice?

UNINTENDED CONSEQUENCES ,[object Object],[object Object],[object Object],[object Object]

Positive and Negative Externalities ,[object Object],[object Object],[object Object]

EXTERNALITIES = Market Failures ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

EXTERNALITIES = Market Failures ,[object Object],[object Object],[object Object],HAVING EDUCATION WILL BRING MORE POSITIVE EXTERNALITIES/EFFECTS!

SCARCITY & + AND - EXTERNALITIES POSITIVE EXTERNALITY NEGATIVE EXTERNALITY ASSIGNMENT SEPT 27 ;1 YELLOW PAD QUIZ 1 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Scarcity and choice 1st term 2011

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