Unit I: Introducing Economic Unit I: Introducing Economic ConceptsConcepts

In this first section of the unit, you will In this first section of the unit, you will learn what learn what economic reasoningeconomic reasoning is and is and how how it affects human economic behaviorit affects human economic behavior. . You will learn that economic reasoning You will learn that economic reasoning can be applied to the act of decision can be applied to the act of decision making.making.We will be learning about the 6 principles We will be learning about the 6 principles of economic reasoning through the of economic reasoning through the analysis of a “mystery”. analysis of a “mystery”.

Economic ReasoningEconomic Reasoning

Case Study: Sedentary Americans Case Study: Sedentary Americans - the Mystery- the Mystery

What types of body images do Americans What types of body images do Americans admireadmire??

According to the Center for Disease Control and Prevention, According to the Center for Disease Control and Prevention, only about 25% of Americans are getting enough exercise only about 25% of Americans are getting enough exercise and about 35% of Americans are overweight.and about 35% of Americans are overweight.

The % of children who are overweight has The % of children who are overweight has doubleddoubled since the since the early 1970s.early 1970s.

So – what’s the mystery?So – what’s the mystery?

Why do an increasing number of Americans, Why do an increasing number of Americans, the same peoplethe same people who who admire the trim and physically fitadmire the trim and physically fit featured in the media featured in the media, , exercise too little and eat too muchexercise too little and eat too much??

Economic reasoning can be applied to humanEconomic reasoning can be applied to humanbehavior.behavior.

We will use economic reasoning to find out.

Why are Americans becoming larger and larger?

Guide to Economic ReasoningGuide to Economic Reasoning

6 guiding principles6 guiding principles1.1. People choosePeople choose2.2. People’s choices involve costsPeople’s choices involve costs3.3. People respond to incentives in predictable ways.People respond to incentives in predictable ways.4.4. People create economic systems that influence People create economic systems that influence

individual choices and incentives.individual choices and incentives.5.5. People gain when they trade voluntarilyPeople gain when they trade voluntarily6.6. People’s choices have consequences that lie in the People’s choices have consequences that lie in the

future. future.

So what do these principles have to do with So what do these principles have to do with sedentary Americans? sedentary Americans?

Guide to Economic Reasoning:Guide to Economic Reasoning:

1. People Choose• People seek to choose the best possible combination of costs and benefits

6. People’s choices have consequencesthat lie in the future.

• People tend to “live for tomorrow”

3. People respond to incentives in predictable ways • Money - most powerful: it can be exchanged for almost anything

4. People create economic systems that influence individual choices and incentives• What are some of the rules in our economic

system?

5. People gain when they trade voluntarily• People will usually behave in a way that benefit themselves when they have a choice

2. People’s Choices involve costs• Called: Opportunity Cost – a person’s next best choice - the “choice not chosen”

Solving the mystery...solutions:Solving the mystery...solutions:

Americans are not gaining extra weight because they are lazy or because of a sudden increase in the desire to eat fatty foods.Instead, they are Instead, they are choosingchoosing new jobs created in a new jobs created in a changing economic system – these new jobs have changing economic system – these new jobs have resulted in less exercise. resulted in less exercise. Americans have Americans have tradedtraded thinness for other values and thinness for other values and work related benefits enabling them to live longer and work related benefits enabling them to live longer and healthier lives.healthier lives.Some Americans enjoy passive entertainment; for them, Some Americans enjoy passive entertainment; for them, the the opportunity costopportunity cost of physical activity would include of physical activity would include giving up time they spend doing things they enjoy giving up time they spend doing things they enjoy (watching TV, playing video games). (watching TV, playing video games).