If you ever talk to someone who has taken an economics course,
most of them would tell you economics is a difficult subject.
During your journey of studying economics, you will see it come
alive through the use of technology making the study economics
relatively easy to understand.
most of them would tell you economics is a difficult subject.
During your journey of studying economics, you will see it come
alive through the use of technology making the study economics
relatively easy to understand.
Decisions are made by individuals, households, firms, governments, and societies by trying
to satisfy their unlimited wants with the limited resources that are out there. When you look
at only the economic resources, though, these are the factors of production of land, labor,
capital, and entrepreneurship. To make these decisions, the entities look at all of the trade
offs and the opportunity cost of their decisions.
to satisfy their unlimited wants with the limited resources that are out there. When you look
at only the economic resources, though, these are the factors of production of land, labor,
capital, and entrepreneurship. To make these decisions, the entities look at all of the trade
offs and the opportunity cost of their decisions.
| Preface and an Introduction to Economics |
In this lesson on Introduction to Economics you will learn the
following:
*Preface
*What are 3 terms to refrain from using in this economics course?
*What is the study of economics?
*What are the factors of production or economic resources?
*What are the economic systems of the world and how do they
make their decisions?
*What are some important terms to know throughout the course?
following:
*Preface
*What are 3 terms to refrain from using in this economics course?
*What is the study of economics?
*What are the factors of production or economic resources?
*What are the economic systems of the world and how do they
make their decisions?
*What are some important terms to know throughout the course?
In this unit on Introduction to Economics you have learned the following:
*Preface
*What are 3 terms to refrain from using in this economics course?
*What is the study of economics?
*What are the factors of production or economic resources?
*What are the economic systems of the world and how do they make their decisions?
*What are some important terms to know throughout the course?
*Preface
*What are 3 terms to refrain from using in this economics course?
*What is the study of economics?
*What are the factors of production or economic resources?
*What are the economic systems of the world and how do they make their decisions?
*What are some important terms to know throughout the course?
| What is the Study of Economics? |
| What is the Difference between a Trade Off and an Opportunity Cost? |
| What are the Factors of Production? |
| Terms in Economics |
Trade offs are the LIST of items you could have chosen outside of your final choice or decision.
Opportunity cost, though, is the next highest-valued alternative or your foregone cost. To learn
more about this, drag the statements inside the blue rectangles on to the yellow rectangles that
indicate the order in which you would place them if these were your options on what to do on a
Friday night.
Opportunity cost, though, is the next highest-valued alternative or your foregone cost. To learn
more about this, drag the statements inside the blue rectangles on to the yellow rectangles that
indicate the order in which you would place them if these were your options on what to do on a
Friday night.
Your Choice #1 (your decision) cost you Choice #2 (your opportunity cost). If there
was an accounting cost (a monetary cost) to your decision, then this monetary cost
also has an opportunity cost.
If your first choice is to Go on a Date and your second choice was to Go Out with
Friends, then your opportunity cost to Go on a Date is the giving up Going Out with
Friends. This is also known as your foregone cost or your next-highest valued
alternative.
Here is another example. If I take my wife to the movies, my trade offs of my time with
my wife could have been, staying home and watching TV with her, going on a long walk
with her, or visiting our friends. Let' say my next-highest valued alternative is staying
home with my wife to watch TV. This is what I am giving up to take her to the movies.
Watching TV is thus my opportunity cost.
I also incur an accounting cost of taking my wife to the movie. Let's say instead of
taking my wife to the movies, I could have used the money to buy dog food, to put gas
in my car, to save the money, and so on. These are my trade offs. Of these trade offs,
let's say my opportunity cost (Choice #2) is purchasing dog food. So, if I take my wife
to the movies, then the cost of the movie is what could I have done with my time if I
didn't take my wife to the movie plus giving up that money (opportunity cost) that I
could have spent on dog food. Since a dog is a "man's best friend," I decide not to
take my wife to the movies. Sorry, sweetheart, there is a cost to most everything!
Rebel, our dog, is happy though because we stay home with him and he gets fed.
I pay for it because my wife is now mad at me for not taking her to the movie. Oh,
well, life is based upon decisions. Some decisions are better than others, but each
has its own cost. The costs you have to look out for are the hidden costs of that
decision.
When a firm makes a decision, it is no different. All the choices are discussed (trade offs),
a final decision is made (the choice), and the opportunity cost is the next best choice that
was given up. This is what it has to give up in order to obtain the first choice.
was an accounting cost (a monetary cost) to your decision, then this monetary cost
also has an opportunity cost.
If your first choice is to Go on a Date and your second choice was to Go Out with
Friends, then your opportunity cost to Go on a Date is the giving up Going Out with
Friends. This is also known as your foregone cost or your next-highest valued
alternative.
Here is another example. If I take my wife to the movies, my trade offs of my time with
my wife could have been, staying home and watching TV with her, going on a long walk
with her, or visiting our friends. Let' say my next-highest valued alternative is staying
home with my wife to watch TV. This is what I am giving up to take her to the movies.
Watching TV is thus my opportunity cost.
I also incur an accounting cost of taking my wife to the movie. Let's say instead of
taking my wife to the movies, I could have used the money to buy dog food, to put gas
in my car, to save the money, and so on. These are my trade offs. Of these trade offs,
let's say my opportunity cost (Choice #2) is purchasing dog food. So, if I take my wife
to the movies, then the cost of the movie is what could I have done with my time if I
didn't take my wife to the movie plus giving up that money (opportunity cost) that I
could have spent on dog food. Since a dog is a "man's best friend," I decide not to
take my wife to the movies. Sorry, sweetheart, there is a cost to most everything!
Rebel, our dog, is happy though because we stay home with him and he gets fed.
I pay for it because my wife is now mad at me for not taking her to the movie. Oh,
well, life is based upon decisions. Some decisions are better than others, but each
has its own cost. The costs you have to look out for are the hidden costs of that
decision.
When a firm makes a decision, it is no different. All the choices are discussed (trade offs),
a final decision is made (the choice), and the opportunity cost is the next best choice that
was given up. This is what it has to give up in order to obtain the first choice.
Economics then is the study of how entities try to solve the problem of unlimited wants
vs. limited economic resources. Economic resources are the factors of production used
in producing goods or providing services. These two concepts of economic resources
and factors of production are synonymous.
Because unlimited wants > availability of economic resources, it is almost as if there is a
fight that goes on inside your head between what to do with your unlimited wants and the
limited resources that are out there because there is always a cost to most EVERYTHING.
vs. limited economic resources. Economic resources are the factors of production used
in producing goods or providing services. These two concepts of economic resources
and factors of production are synonymous.
Because unlimited wants > availability of economic resources, it is almost as if there is a
fight that goes on inside your head between what to do with your unlimited wants and the
limited resources that are out there because there is always a cost to most EVERYTHING.
>
There is a cost
to be paid
to be paid
So what are these economic resources or factors of production that are used in the
production process? Click on the right arrow button below to find out.
production process? Click on the right arrow button below to find out.
The factors of production or economic resources that are used to produce other goods or
services are the natural resources (land), human resources (labor and entrepreneurship),
and non-human resource (capital). Test your knowledge on these by dragging each item
below and placing it in to the appropriate column in the table below.
services are the natural resources (land), human resources (labor and entrepreneurship),
and non-human resource (capital). Test your knowledge on these by dragging each item
below and placing it in to the appropriate column in the table below.
| The Invisible Hand |
| Microeconomics vs. Macroeconomics |
| Steven M. Reff Economics Lecturer University of Arizona (2007 - 2016) The 2015 University of Arizona Five-Star Faculty Award |
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| Post Hoc Fallacy |
| Fallacy of Composition |
| Normative vs. Positive Statements |
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| Reffonomics.com 3 x 3 Videos (3-minute videos + 3 Multiple Choice Questions) |
Introduction to Economics (2:23 minutes)
Trade Offs and Opportunity Cost (2:23 minutes)
Resources (3:02 minutes)
Economics Systems (3:10 minutes)
Trade Offs and Opportunity Cost (2:23 minutes)
Resources (3:02 minutes)
Economics Systems (3:10 minutes)
Many people think the study of economics is the study of money or
the study of how to make money. The study of economics is neither
of these.
Click on the play button below to learn what the definition of
economics is.
the study of how to make money. The study of economics is neither
of these.
Click on the play button below to learn what the definition of
economics is.
| Thomas R. Brown Foundation |
The idea behind The High School Economics
eTextbook by Reffonomics.com started through
an initial start up grant from the Thomas R. Brown
Foundation in the early 2000s. The TRB
Foundation is instrumental in making sure
students become economically literate before
graduating from high school. The TRB's moral
compass and financial support for this eTextbook
and eWorkbook is the reason these were written
for you.
eTextbook by Reffonomics.com started through
an initial start up grant from the Thomas R. Brown
Foundation in the early 2000s. The TRB
Foundation is instrumental in making sure
students become economically literate before
graduating from high school. The TRB's moral
compass and financial support for this eTextbook
and eWorkbook is the reason these were written
for you.
| Professor Emeritus at The University of Arizona -- Dr. Don Wells |
In 1978 I started teaching economics
and thought I was doing a fairly good
job. That was until the early 1980s
when I took a class from Professor
Don Wells. He changed
the way I thought, and just as
importantly, he changed the way I
taught. Inside this eTextbook you
will see several outstanding lessons
created by Professor Emeritus Don
Wells.
and thought I was doing a fairly good
job. That was until the early 1980s
when I took a class from Professor
Don Wells. He changed
the way I thought, and just as
importantly, he changed the way I
taught. Inside this eTextbook you
will see several outstanding lessons
created by Professor Emeritus Don
Wells.
| Professor Emeritus at The University of Arizona -- Dr. Gerald Swanson |
After taking a couple of classes from Professor Wells, I took
some classes in the late 1980s with Dr. Gerry Swanson,
who taught 40,000 students during his 43-year tenure at
The University of Arizona. He was actively involved with
The Arizona Council on Economic Education. Dr. Gerry
Swanson taught an immense amount about economics,
but just as importantly, he taught how to present the
difficult material of economics in a fun, exciting, and
passionate manner.
some classes in the late 1980s with Dr. Gerry Swanson,
who taught 40,000 students during his 43-year tenure at
The University of Arizona. He was actively involved with
The Arizona Council on Economic Education. Dr. Gerry
Swanson taught an immense amount about economics,
but just as importantly, he taught how to present the
difficult material of economics in a fun, exciting, and
passionate manner.
| Preface: |
Sir Isaac Newton who formulated the law of gravity in 1687 once said:
Take your time and give the quote above some thought. Think
about the individuals in your life who were giants in helping you
become who you are today.
Here are My Three Giants in Economics Education:
Professor Emeritus, Dr. Don Wells taught Economics at Southern Illinois
University for 9 years, and at the University of Arizona for 43 years. He
passed away at age 92 in June of 2022.
University for 9 years, and at the University of Arizona for 43 years. He
passed away at age 92 in June of 2022.
Dr. Swanson passed away at age 79 in January of 2020.
Thomas R. Brown passed away at age 75 in June of 2000.
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The Father of Economics, Adam Smith, wrote the most
important document on Economics in 1776 entitled The
Wealth of Nations. Coincidentally, that same year the
Declaration of Independence was signed in Philadelphia,
Pennsylvania in 1776.
important document on Economics in 1776 entitled The
Wealth of Nations. Coincidentally, that same year the
Declaration of Independence was signed in Philadelphia,
Pennsylvania in 1776.
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The first economics textbook I read was in 1974 by Paul Samuelson's
Principles of Economics.
Principles of Economics.
Paul Samuelson, who died in
December 2009 at the age of
94, was the first American to
win the Nobel Prize in
Economics back in 1970.
December 2009 at the age of
94, was the first American to
win the Nobel Prize in
Economics back in 1970.
He once stated this about the study of
economics:
"People who have never made a
systematic study of economics are
hampered in even thinking about
national issues. They are like deaf
people trying to listen to a
symphony. Give them hearing aids
and they may still lack talent, but at
least they have a fighting chance of
sensing what music really is."
economics:
"People who have never made a
systematic study of economics are
hampered in even thinking about
national issues. They are like deaf
people trying to listen to a
symphony. Give them hearing aids
and they may still lack talent, but at
least they have a fighting chance of
sensing what music really is."
Economics is a subject that teaches you to take your blinders off by placing your hands over
your eyes so you don't see the world as you think it should be or ought to be (normative
statements), but as you slowing open your hands away from your eyes and begin to see the
world as it truly is (positive statements), then and only then will you become a true student of
economics.
your eyes so you don't see the world as you think it should be or ought to be (normative
statements), but as you slowing open your hands away from your eyes and begin to see the
world as it truly is (positive statements), then and only then will you become a true student of
economics.
| In Conclusion |
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As you can see from the list above nothing is "free" on
this Earth. This is why in this eTextbook you will
always see the word "free" written with quotation
marks to remind you that almost nothing on this Earth
is truly "free." There is a cost to nearly EVERYTHING!
If you don't want to use the word "free," you can
always use the word "gratuitous." Gratuitous means
it cost someone something, but it is given away with
no price paid. This doesn't mean there wasn't a cost.
Price paid and cost are two different terms. You will
learn about this at the end of this lesson.
this Earth. This is why in this eTextbook you will
always see the word "free" written with quotation
marks to remind you that almost nothing on this Earth
is truly "free." There is a cost to nearly EVERYTHING!
If you don't want to use the word "free," you can
always use the word "gratuitous." Gratuitous means
it cost someone something, but it is given away with
no price paid. This doesn't mean there wasn't a cost.
Price paid and cost are two different terms. You will
learn about this at the end of this lesson.
As you can see from the list above there is a substitute
for most everything. We aren't saying it is a good
substitute or even a suitable substitute, but there is a
substitute for most everything. If you ever see the word
"need" inside this eTextbook, it will be written with
quotations marks to remind you that you don't "need"
anything. Instead of using the word "need," use the word
"want."
for most everything. We aren't saying it is a good
substitute or even a suitable substitute, but there is a
substitute for most everything. If you ever see the word
"need" inside this eTextbook, it will be written with
quotations marks to remind you that you don't "need"
anything. Instead of using the word "need," use the word
"want."
You hear this term "free" all the time. Get this for "free." Buy this and get this for
"free." Click on the play button to find out what is truly "free."
"free." Click on the play button to find out what is truly "free."
| Terms in Economics |
You hear the word "need" all the time. I "need" this or I "need" that. Click on the play
button below and watch a list of things students in my economics classes over the years
say they "need." When the entire list is finished showing, you will learn the economic
definition of the word "need." After learning this, press the explain button to see
examples of substitutes for each item on the list.
button below and watch a list of things students in my economics classes over the years
say they "need." When the entire list is finished showing, you will learn the economic
definition of the word "need." After learning this, press the explain button to see
examples of substitutes for each item on the list.
| "Need" |
The first two topics are from what Professor Don Wells taught me in my first class with
him in 1985. He inspired me to recreate these two lessons so his name lives on.
him in 1985. He inspired me to recreate these two lessons so his name lives on.
| "FREE" |
| "FAIR" |
In Dr. Gerry Swanson's class I learned whenever you hear the word "fair," always
say to yourself "Fair to Whom?" I took his thoughts and found interesting paragraphs
that should make you think about whenever you hear the word "fair."
say to yourself "Fair to Whom?" I took his thoughts and found interesting paragraphs
that should make you think about whenever you hear the word "fair."
The word "fair" is similar to the word "beauty," as
they are both in the eye of the beholder. Essentially,
"fair" is not an objective standard but a matter of
personal opinion. As you learned in the lesson
above, the term "fair" is a normative statement based
upon opinion. Economics will teach you how to
listen to people carefully and understand whether
they are using a normative statement or a positive
statement within a conversation. Learn more about these two statements at the end of this lesson.
they are both in the eye of the beholder. Essentially,
"fair" is not an objective standard but a matter of
personal opinion. As you learned in the lesson
above, the term "fair" is a normative statement based
upon opinion. Economics will teach you how to
listen to people carefully and understand whether
they are using a normative statement or a positive
statement within a conversation. Learn more about these two statements at the end of this lesson.
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Economic Systems:
There are three types of economic systems:
1. Market Economy
2. Command Economy
3. Traditional Economy
Each of these systems answer three questions:
1. WHAT should be produced?
2. HOW should it be produced?
3. FOR WHOM should it be produced?
In a MARKET ECONOMY:
1. WHAT should be produced is determined by the consumers
and producers.
2. HOW should it be produced is determined by businesses.
3. FOR WHOM should it be produced is determined by who is
willing and able to pay for the good or service.
In a COMMAND ECONOMY:
1. WHAT should be produced is determined by the government.
2. HOW it should be produced is determined by the government.
3. FOR WHOM should it be produced is determined by the
government.
In a TRADITIONAL ECONOMY:
1. WHAT should be produced is determined by custom or tradition.
2. HOW it should be produced is determined by who consumes
the good or service.
3. FOR WHOM should it be produced is for the individual who
produced the good or for the collective group.
Even though there are three economic systems, the most popular type is a
mixture of all three of these systems. This is called a mixed economy, a system
which incorporates a mixture of the three types of economic systems (market,
command, and traditional). Even though most economies are a mixed economy,
you will notice many of them "lean" towards one of the three types of economies.
For example, if you look on the graph below, you will notice there are countries
that "lean" towards a particular type of economic system (market, command, or
traditional). Click on the buttons on the map below for a quick review of the three
economics systems and the three questions that all economic systems answer.
There are three types of economic systems:
1. Market Economy
2. Command Economy
3. Traditional Economy
Each of these systems answer three questions:
1. WHAT should be produced?
2. HOW should it be produced?
3. FOR WHOM should it be produced?
In a MARKET ECONOMY:
1. WHAT should be produced is determined by the consumers
and producers.
2. HOW should it be produced is determined by businesses.
3. FOR WHOM should it be produced is determined by who is
willing and able to pay for the good or service.
In a COMMAND ECONOMY:
1. WHAT should be produced is determined by the government.
2. HOW it should be produced is determined by the government.
3. FOR WHOM should it be produced is determined by the
government.
In a TRADITIONAL ECONOMY:
1. WHAT should be produced is determined by custom or tradition.
2. HOW it should be produced is determined by who consumes
the good or service.
3. FOR WHOM should it be produced is for the individual who
produced the good or for the collective group.
Even though there are three economic systems, the most popular type is a
mixture of all three of these systems. This is called a mixed economy, a system
which incorporates a mixture of the three types of economic systems (market,
command, and traditional). Even though most economies are a mixed economy,
you will notice many of them "lean" towards one of the three types of economies.
For example, if you look on the graph below, you will notice there are countries
that "lean" towards a particular type of economic system (market, command, or
traditional). Click on the buttons on the map below for a quick review of the three
economics systems and the three questions that all economic systems answer.
| What are the Economic Systems of the World and How Are Decisions Made? |
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