Economics for Leaders Don’t try to write down everything I say Lectures will be fast-paced with...
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Economics for Leaders Don’t try to write down everything I say Lectures will be fast-paced with lots of information and lots of interaction Pay attention
Economics for Leaders Dont try to write down everything I say
Lectures will be fast-paced with lots of information and lots of
interaction Pay attention and get involved As the week ends, it
will come together You can have all of these slides and materials
Lets Learn Some ECON
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Economics for Leaders Each morning I will award a prize to one
or two students who shined the day before If you want to win then
you need to be alert, engaged and participate in a meaningful way
Lets have some FUN! Post-Test at the end of the week (80%)**
Shining Students
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At the end of the day, always remember Joke of the Day
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You can tune a piano, but Joke of the Day
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You cant TUNA FISH! Joke of the Day
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Economics for Leaders Human Prosperity and social cooperation
develop spontaneously in societies that protect property rights and
encourage voluntary trade/exchange. Developing an economic way of
thinking empowers people to understand and explain the world in
which we live. Hypotheses for the Week
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Why are some countries rich and others poor?
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Why do we care?
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Economics for Leaders Opinions matter and are of equal value at
the ballot box. But on matters of rational deliberation the value
of an opinion is determined by the knowledge and evidence on which
it is based. Statements of opinion should initiate the quest for
economic understanding, not end it. Economic Reasoning Principle
#5: Understanding based on knowledge and evidence imparts value to
opinions.
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Economics for Leaders The rules of the game shape how decisions
are made. Decisions determine outcomes. People respond to
incentives in predictable ways. The Rules of the Game Institutions
& Norms
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Economics for Leaders Something is scarce if society cannot
have all it wants at no cost. By cost we mean OPPORTUNITY COST.
Some things are more scarce than others. Relative scarcity is
determined by what must be given up. Scarcity
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Economics for Leaders Because the world is characterized by
scarcity, we are forced to make choices. We must allocate scarce
resources among competing uses. Wood that is used for tables and
chairs cannot be used for crutches (or forest). Land that is kept
undeveloped cannot be used to build housing for the poor. Time
Choices
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Economics for Leaders
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Because we are forced to make choices (scarcity), we are faced
with costs. The cost of any choice is what is given up. Choosing is
REFUSING! Opportunity Cost
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Economics for Leaders Choosing Between Alternatives
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Economics for Leaders
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Do You Want to Trade?
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Economics for Leaders
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Do You Want to Trade?
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Economics for Leaders Economic Reasoning Principle #1: People
choose, and individual choices are the source of social outcomes.
Scarcity necessitates choices: not all of our desires can be
satisfied. People make these choices based on their perceptions of
the expected costs and benefits of the alternatives.
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Economics for Leaders Economic Reasoning Principle # 2: Choices
impose costs; people receive benefits and incur costs when they
make decisions. The cost of a choice is the value of the next- best
alternative foregone, measurable in time or money or some
alternative activity given up. What did you give up to be
here?
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Economics for Leaders
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choices TRADE-OFFS forgone alternatives OPPORTUNITY COST!
choosing is REFUSING! the cost of something is what you give up.
OPPORTUNITY COST!
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Economics for Leaders Economic Reasoning Principle # 3: People
respond to incentives in predictable ways. Choices are influenced
by incentives, the rewards that encourage and the punishments that
discourage actions. When incentives change, behavior changes in
predictable ways. People do what makes them better off. Marginal
Benefit, Marginal Cost (MB > MC).
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Economics for Leaders Choosing Between Alternatives
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Economics for Leaders
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Do You Want to Trade?
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Economics for Leaders Do You Want to Trade?
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Economics for Leaders The benefit (value) of the next one will
eventually be lower. Diminishing marginal benefit (value). Value is
based on benefit received. Rolos, Washing machines, automobiles,
houses, vacations. A Fact Regarding Benefits
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Which is more realistic? Production Possibilities Frontier
(PPF): Graphical representation of the possible goods/services an
economy can produce at a given time with the available resources
and technology
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Economics for Leaders The cost of the next one will eventually
be higher. Rising marginal cost. Cost is based on what is given up.
Wheat vs. Oranges, work, vacations, China and India growing
economies A Fact Regarding Costs
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Economics for Leaders Do it if MB > MC Choose Between
Alternatives
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Economics for Leaders Big Ideas choices TRADE-OFFS forgone
alternatives OPPORTUNITY COST! choosing is REFUSING! the cost of
something is what you give up. OPPORTUNITY COST!
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Why cant we have all we want?
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Economics for Leaders Big Ideas People do things that make them
better off. Diminishing marginal value (benefit). Rising marginal
cost (opportunity cost). The rules of the game shape how decisions
are made. Decisions determine outcomes.
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Choosing Between Alternatives
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Economics for Leaders "What is YOUR solution? "There are no
solutions," I said. "There are only trade-offs. "The people DEMAND
solutions!" she shot back angrily. The people can demand square
circles if they want. But that doesn't mean that they will get
them. Quote From Thomas Sowell Opportunity Cost!