Economic way of thinking is the introductory chapter for Holt McDougal's textbook Economics:Concepts and Choices, 2011. Topics shown include; scarcity, trade-offs, opportunity cost, production possibilities curve, as well as, positive and normative economics.
Economic way of thinking: Economics - Concepts and Choices, 2011. Holt McDougal
1. The Economic Way of Thinking
Dr. T. D. Mitchell
Bonneville High School,
Idaho Falls, Idaho
2. Scarcity: The Basic Economic Problem
•Principle 1 People Have Wants
•Principle 2 Scarcity Affects Everyone
• Goods
• Services
• Consumer
• Producer
Economics: Concepts and Choices, 2011. Holt McDougal
3. Scarcity: The Basic Economic Problem
•Scarcity Leads to Three Economic Questions
• What will be produced?
• How will it be produced?
• For whom it will be produced?
Economics: Concepts and Choices, 2011. Holt McDougal
4. The Factors of Production
Land Labor
Capital
Economics: Concepts and Choices, 2011. Holt McDougal
Entrepreneurship
5. Economic Choices: Opportunity Cost
Economics: Concepts and Choices, 2011. Holt McDougal
•Making Choices
• Incentives
• Utility
• Economize
•Factors that help you make an economic
choice:
1. Motivations for choice
2. No Free Lunch
6. Trade-Offs and Opportunity Cost
Economics: Concepts and Choices, 2011. Holt McDougal
•Making Trade-Offs
•Counting the Opportunity Costs
•Analyzing Choices
•Marginal Cost
•Marginal Benefits
7. Analyzing Production Possibilities
Economics: Concepts and Choices, 2011. Holt McDougal
•Economic Models
• Production Possibilities Curve (Frontier)
• Assumption
• Resources are fixed
• All resources are fully employed
• Technology is fixed
9. What We Learn from PPCs
Economics: Concepts and Choices, 2011. Holt McDougal
•Efficiency
•Underutilization
•Law of increasing opportunities costs
•Beans and Bullets
11. Economists Toolbox
Economics: Concepts and Choices, 2011. Holt McDougal
• Statistics
• Using economic models
• Charts and tables
• Using Graphs
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12. Economists Study
Economics: Concepts and Choices, 2011. Holt McDougal
Macroeconomics
The study of the whole economy
Microeconomics
The study of the individual
consumer
Units of Study Units of Study
Economic Growth
Economic Stability
International Trade
Consumer Markets
Business Markets
Labor Markets
Topics of interest Topics of Interest
Money, Banking, finance
Government Taxing and
Spending Policies
Employment and
unemployment
Inflation
Markets, prices, costs, profits,
Competition, Government
Regulations
Consumer Behavior
Business Behavior
13. Positive and Normative Economics
Positive Economics
• A way of describing and
explaining economics as it is,
not as it should be.
• Involves verifiable facts, not
value judgments.
Normative Economics
• A way of describing and
explaining what economic
behavior ought to be, not
what it actually is.
• Does not involve value
judgments because it seeks
to make recommendations
for action.
Economics: Concepts and Choices, 2011. Holt McDougal
14. Adam Smith:
Founder of Modern Economics
250 Years ago, economics
did not exist as an academic
discipline.
In 1776, Adam Smith
changed all this.
Born in Scotland, studied
literature, logic, and moral
philosophy.
Wrote Wealth of Nations in
1776.
‐ Economic self-interest
‐ The invisible hand
‐ Became the foundation of
modern economics
Economics: Concepts and Choices, 2011. Holt McDougal