Chapter Overview
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Fundamental Questions 1. What is economics?2. What is the economic way of thinking? Teaching ObjectivesThe primary purpose of this chapter and the accompanying appendix is to define and explain the scope of economics and the methodology economists use in solving problems. A unique feature of this chapter is that it explains the economic way of thinking and shows the student how to apply the tools of economic thinking to everyday decisions. The chapter also focuses on the scientific method as it is applied by economists. An area that requires special attention is the appendix. Graphs are used consistently in the course, so the student will need a good knowledge of how a graph is constructed and how to interpret its lines. It would be best to follow the examples in the appendix so that the student has both the text and class notes to review. Stress that the concept of scarcity is a key element in all economic analysis and a link to the rest of the course.Key Term ReviewScarcity Lecture Outline and Teaching Strategies 1. The Definition of Economics Economics is the study of how people choose to allocate their resources among unlimited wants. 1.a. Scarcity: Scarcity means that there is not enough of an item to satisfy everyone who wants it. Teaching Strategy: Try to show scarcity by starting the lecture with an example from everyday life, for example, buying food in a supermarket with limited funds or deciding whether to spend $15 on a CD or on popcorn and a movie. Teaching Strategy: Ask your students to give examples of economic goods, free goods, and economic bads. Note that many things that used to be considered economic bads, such as aluminum cans, glass, and plastic, are now economic goods because a market has been created for recycled commodities. 1.b. Choices: Economics is the study of how people choose to use their scarce resources to attempt to satisfy their unlimited wants.Teaching Strategy: Carefully define the types of resources in an economy and show how income is derived from those resources in the market. 1.c. Rational self-interest: This is the term that economists use to describe how people make choices.Teaching Strategy: Ask your students to write a few paragraphs describing the alternatives they considered before making their college choice. Then ask whether they believe that their selection process was based on rational self-interest. Teaching Strategy: Ask your students to discuss whether it is rational or irrational for a motorcyclist to not wear a helmet. 2. The Economic Approach The economic approach is a logical method of approaching and solving economic problems.Teaching Strategy: Try having students create a model of their own economic behavior in class, for example, buying clothing before and during a sale. 2.a. Positive and normative analysis: Positive analysis studies what is. Normative analysis studies what ought to be. A theory (model) is a simplified story based on positive analysis used to explain an event.Teaching Strategy: Try to show economic relationships in real-world situations, for example, positive economics reports the number of poor, whereas normative economics states that no one should be poor and that wealth should be redistributed. 2.b. Scientific method: This method analyzes any issue using five steps: recognition, assumptions, model building, hypothesis, and testing.Teaching Strategy: Ask your students to discuss how an increase in the price of pizza would affect the demand for pizza. Then ask your students under what circumstances the price increase would have no effect. Teaching Strategy: Point out to your students that economics differs from other sciences because, for the most part, it is a nonexperimental science. 2.c. Common mistakes: The fallacy of composition holds that what is true for one is true for all; association as causation assumes that if B follows A, then A has caused B.Teaching Strategy: Try to explain the example of each common mistake used in the text and generate a discussion around each. 2.d. Microeconomics and macroeconomics: Microeconomics studies economics at the level of the individual consumer or firm; macroeconomics studies the economy as a whole.Teaching Strategy: Show how a change in taxes can be analyzed from both a macroeconomic and a microeconomic perspective. |
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