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Practical Econ, U1, Packet 1


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Practical Econ, U1, Packet 1

  1. 1. Unit I: Introducing Economic Concepts <ul><li>In this first section of the unit, you will learn what economic reasoning is and how it affects human economic behavior . </li></ul><ul><li>You will learn that economic reasoning can be applied to the act of decision making. </li></ul><ul><li>We will be learning about the 6 principles of economic reasoning through the analysis of a “mystery”. </li></ul>Economic Reasoning
  2. 2. Case Study: Sedentary Americans - the Mystery <ul><li>What types of body images do Americans admire ? </li></ul><ul><li>According to the Center for Disease Control and Prevention, only about 25% of Americans are getting enough exercise and about 35% of Americans are overweight. </li></ul><ul><li>The % of children who are overweight has doubled since the early 1970s. </li></ul><ul><li>So – what’s the mystery? </li></ul><ul><ul><li>Why do an increasing number of Americans, the same people </li></ul></ul><ul><ul><li>who admire the trim and physically fit featured in the media , </li></ul></ul><ul><ul><li>exercise too little and eat too much ? </li></ul></ul>
  3. 3. Economic reasoning can be applied to human behavior. We will use economic reasoning to find out. Why are Americans becoming larger and larger?
  4. 4. Guide to Economic Reasoning <ul><li>6 guiding principles </li></ul><ul><ul><li>People choose </li></ul></ul><ul><ul><li>People’s choices involve costs </li></ul></ul><ul><ul><li>People respond to incentives in predictable ways. </li></ul></ul><ul><ul><li>People create economic systems that influence individual choices and incentives. </li></ul></ul><ul><ul><li>People gain when they trade voluntarily </li></ul></ul><ul><ul><li>People’s choices have consequences that lie in the future. </li></ul></ul><ul><li>So what do these principles have to do with sedentary Americans? </li></ul>
  5. 5. Guide to Economic Reasoning: <ul><li>1. People Choose </li></ul><ul><li>People seek to choose </li></ul><ul><li>the best possible combination </li></ul><ul><li>of costs and benefits </li></ul><ul><li>6. People’s choices have consequences </li></ul><ul><li>that lie in the future. </li></ul><ul><ul><li>People tend to “live for tomorrow” </li></ul></ul><ul><li>3. People respond to incentives in </li></ul><ul><li>predictable ways </li></ul><ul><li>Money - most powerful: it can be </li></ul><ul><li>exchanged for almost anything </li></ul><ul><li>4. People create economic systems </li></ul><ul><li>that influence individual choices and incentives </li></ul><ul><li>What are some of the rules in our economic </li></ul><ul><li>system? </li></ul><ul><li>5. People gain when they trade voluntarily </li></ul><ul><li>People will usually behave in a way that </li></ul><ul><li>benefit themselves when they have a choice </li></ul><ul><li>2. People’s Choices involve costs </li></ul><ul><li>Called: Opportunity Cost – a person’s next </li></ul><ul><li>best choice - the “choice not chosen” </li></ul>
  6. 6. Solving the <ul><li>Americans are not gaining extra weight because they are lazy or because of a sudden increase in the desire to eat fatty foods. </li></ul><ul><li>Instead, they are choosing new jobs created in a changing economic system – these new jobs have resulted in less exercise. </li></ul><ul><li>Americans have traded thinness for other values and work related benefits enabling them to live longer and healthier lives. </li></ul><ul><li>Some Americans enjoy passive entertainment; for them, the opportunity cost of physical activity would include giving up time they spend doing things they enjoy (watching TV, playing video games). </li></ul>