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.

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

8. Review: Production Possibilities Curve
Economics: Concepts and Choices, 2011. Holt McDougal

9. What We Learn from PPCs
Economics: Concepts and Choices, 2011. Holt McDougal
•Efficiency
•Underutilization
•Law of increasing opportunities costs
•Beans and Bullets

10. Changing Production Possibilities
Economics: Concepts and Choices, 2011. Holt McDougal
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6
7
0 2 4 6 8 10 12 14
Refrigerators
Cars
Production Possibilities Curve

11. Economists Toolbox
Economics: Concepts and Choices, 2011. Holt McDougal
• Statistics
• Using economic models
• Charts and tables
• Using Graphs
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2
4
6
Category 1 Category 2 Category 3 Category 4
Chart Title
Series 1 Series 2 Series 3
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2
4
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Category 1 Category 2 Category 3 Category 4
Series 1 Series 2 Series 3

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