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Introduction to AP Economics

Introduction to AP Economics. Welcome!. ECONOMICS. The World & Resources. People (human nature). +. Why do we need Economics?. Resources are SCARCE People have Unlimited Wants & Needs FORCES: 3) Society to allocate resources. End of Day 1. Exact Sciences. Social Science. versus.

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Introduction to AP Economics

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  1. Introduction to AP Economics Welcome!

  2. ECONOMICS

  3. The World & Resources People(human nature) +

  4. Why do we need Economics? • Resources are SCARCE • People have Unlimited Wants & Needs FORCES: 3) Society to allocate resources

  5. End of Day 1

  6. Exact Sciences Social Science versus Theory based Inexact Science Difficult/impossible to prove Based on human behavior Fact based Proofs often used: 2 + 2 = 4 • Examples: • Psychology • Economics • History • Examples: • Physics • Chemistry • Mathematics Social sciences:academic disciplines which study the sociallife of human groups & individuals • Examples: economics, geography, history, political science, psychology & sociology

  7. Formal Definition of Economics • The social science of how society allocates scarce resources among unlimited wants and needs.

  8. Air versus Oil Economics = The social science of how a society allocates their scarce resourcesamong unlimited wants & needs. Non-renewable Renewable

  9. Economic Systems • Economic system:   a system of production, resource allocation & distribution of goods/services. • All types of economic systems allocate scarce resources • Society must choose both a political & economic system

  10. 3 Types of Economic Systems • MARKET • COMMAND • TRADITIONAL

  11. There is NO Free Lunch • Nothing is free in economics • #1 Rule of Economics! • People face Trade-offs in all decision making • Decisions have both: -Opportunity Costs & Opportunity Benefits -Short RunandLong Run implications

  12. 2 Types of Costs: Marginal means “next unit” Marginal Benefit = MB Marginal Cost = MC MB ≥ MC(“do it” or “buy it”)

  13. Trade-off Analysis Should I go to college? Opportunity Benefit Opportunity Cost Explicit Cost? Implicit Cost? Long Run? Short Run?

  14. End of 2nd Day Please read your textbook!

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