i can understand the definition of economics. i can understand why people have to make choices and...
TRANSCRIPT
THE ECONOMICS BEHIND FINANCIAL DECISIONS
I can understand the definition of Economics.
I can understand why people have to make choices and that with choosing comes consequences.
I can understand that with every benefit there is always a cost.
I can understand that incentives help to set goals.
I can understand that setting goals helps in the efficient use of scarce resources.
STUDENT TARGET
CONCEPTS Economics Scarcity Opportunity Cost Income Consumption Saving Incentives Cost Benefit
Goals Budget Utility Choice Consumer Producer Wages Short-term Long-term
Standard 1 : ScarcityProductive resources are limited. Therefore, people can not have all the goods and services they want; as a result, they must choose some things and give up others.
Standard 2 : Marginal Cost/BenefitEffective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something: few choices are "all or nothing" decisions.
NATIONAL STANDARDS
Standard 3 : Allocation of Goods and Services
Different methods can be used to allocate goods and services. People acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.
Standard 4 : Role of IncentivesPeople respond predictably to positive and negative incentives
NATIONAL STANDARDS
WHICH ONE OF THESE TWO THINGS WOULD YOU RATHER BE
DOING RIGHT NOW?
A Cost is something you give up in making a choice and a Benefit is something you gain. What would be the costs and the benefits of doing this now?
COSTS AND BENEFITS
COSTS AND BENEFITS
WHY MUST YOU CHOOSE? BECAUSE OF SCARCITY
Why have you chosen to do this instead? What are the costs and benefits?
SCARCITY TELLS ME ICAN’T DO BOTH, IHAVE TO MAKE A CHOICE.SINCE YOU CAN’T HAVEEVERYTHING YOU WANTECONOMICS HELPS USGET THE MOST OUT OF WHAT WE CAN HAVE.
SCARCITY
TIME: There is not enough of it to do all of the things you want to do.
MONEY: There are a lot of things you would love to buy now, but what about all of the things you’ll want in the future?
LIFE: We are only on this planet for so long so the quality of our years matter.
HEALTH: Human beings are not indestructible and there are limits we must recognize.
FIRST IMPRESSIONS: There is only one so you better make it a good one.
WHAT THINGS IMPORTANT TO YOU ARE SCARCE?
Have you ever heard the phrase:
“There’s no such thing as a free lunch”?
T.I.N.S.T.A.A.F.L.
EVEN THOUGHTHE SIGN SAYSSO, IS IT TRULYFREE? I MAY NOTGIVE UP MONEY,BUT WHAT AM IGIVING UP BYATTENDING?
OPPORTUNITY COST
IF I EAT LUNCH FROM 12:00 TO 1:00 P.M., WHAT CAN’T I DO?
What is the Opportunity Cost of the following decisions?
Buying a gift for a friend. Working at a job after school Waiting on line for an hour to buy a new cell
phone Saving 50% of this weeks paycheck.
Did you all have the same answers? Why not?
OPPORTUNITY COST IS THE BEST OPTION GIVEN UP WHEN YOU MAKE A
CHOICE
Economics is the study of how people make choices. When you make a good economic decision the benefits will be greater than the costs.
WHAT IS ECONOMICS?
UTILITY = SATISFACTION
He made a good decision
He made a bad decision
SETTING GOALS CREATES A TARGET FOR YOU TO AIM FOR AND GIVES PURPOSE TO THE USE OF YOUR SCARCE RESOURCES.
TAKE OUT A PIECE OF PAPER AND DRAW A LINE VERTICALLY DOWN THE MIDDLE. LABEL ONE SIDE SHORT-TERM GOALS AND THE OTHER SIDE LONG-TERM GOALS. MAKE A LIST OF THINGS YOU WANT TO ACCOMPLISH WITHIN A YEAR OR TWO AND THEN A LIST OF THINGS YOU WANT TO ACCOMPLISH IN 5-
10 YEARS AND BEYOND.
SHORT-TERM GOALS LONG-TERM GOALS
SPEND TIME WITH YOUR FAMILY
GET GOOD GRADES THIS SEMESTER
BUY A NEW PHONE EAT BETTER TRAVEL DURING MY
NEXT VACATION FIND A JOB OPEN A SAVINGS ACCT.
GET INTO A GREAT COLLEGE
OWN A HOME BE FINANCIALLY
INDEPENDENT HAVE A GREAT CAREER RETIRE WHEN I AM 40 TRAVEL AROUND THE
WORLD HAVE A BIG HAPPY
FAMILY OF MY OWN
INCENTIVES are things such as rewards that motivate a person to do something. Punishment is meant to be a disincentive.
PEOPLE RESPOND TO INCENTIVES
YOUR GOALS ARE DETERMINED BY WHAT IS IMPORTANT TO YOU. ACCOMPLISHING THEM
IS THE REWARD.
INCENTIVES HELP PEOPLE MAKE CHOICES
OVER TIME, YOUR SHORT-TERM GOALS CHANGE AS YOUR
PRIORITIES CHANGE.
THINK ABOUT THINGS THAT ARE
IMPORTANT TO YOU NOW THAT WON’T
BE SO IMPORTANT IN THE FUTURE?
CHANGING INCENTIVES CHANGE PEOPLE’S CHOICES
SCARCITY TELLS US WE CAN’T HAVE EVERYTHING WE WANT
EVERY DAY OF OUR LIVES WE HAVE TO MAKE CHOICES
IN MAKING CHOICES WE WEIGH THE BENEFITS AGAINST THE COSTS
NOTHING IS FREE, THERE IS ALWAYS AN OPPORTUNITY COST
A GOOD ECONOMIC DECISION CREATES MORE BENEFITS THAN COSTS
INCENTIVES HELP US TO CHOOSE SETTING GOALS HELPS TO FOCUS
SO, TO RECAP!!!
TRADE-OFFS
OR
TRADE-OFFS
OR
TRADE-OFFS
OR
TRADE-OFFS
OR
WHERE DOES YOUR MONEY COME FROM?
WORK/ALLOWANCE GIFTS/GAMBLING/FOUND
RENTS/LENDING/INVESTING
WHERE DOES YOUR MONEY GO?
It’s the Motorola DynaTAC 8000X , the world’s first cell phone. It went on sale March 6, 1983 and the initial price was $3995 ($10,000 in today’s dollars). It had enough battery life for 30 minutes of talk, cost $5/minute to talk and there was a waiting list of thousands anxious to buy it.
DO YOU KNOW WHAT THIS IS?
WHY WOULD ANYONE BUY THIS?
WHY DO PEOPLE SAVE THEIR MONEY?
BECAUSE:
IF YOU SAVE TO BUY SOMETHING IN THE
FUTURE,
YOU CAN NOT BUY SOMETHING TODAY
WHY IS IT SO HARD TO SAVE?
Trade-offs require a sacrifice in order to achieve satisfaction
Immediate gratification is a strong incentive to act
Income is earned from many sources
People buy things if they provide utility
Buying something today results in the inability to buy something in the future
Saving is hard because it delays gratification
SO, TO RECAP