Economics

Economics

• See also [Social Studies Skills|Social Studies Skills]

[Category:Social Studies]

Economics point of view

Economists look at human relations and outcomes through certain lenses, including:

• values & exchange
• utility
• incentives
• impacts

Useful Economic vocabulary, models & theories

Cost

• sunk cost

goods

• Complement good
• Coordination good
• Free goods
• Inferior goods
• Normal goods
• Public good
  • services available to all that have no competition, such as utilities
    • use of a public good by one person does not reduce its availability to another
• Substitute good

labor

• division of labor
• flexibility of labor

externalities

• = impacts or consequences upon others (external)
• externalities have an inherent duality
  • the external actors must be present for the external impact
    • i.e., if nobody lives near the factory, its noise won't bother anyone
      • the noise is an externality only because people can hear it
    • however, those people living near it may have a benefit that is greater than the externality
      • such as jobs, whatever the factory is making, etc.
  • from economist Cose

Prisoner's Dilemma

• the "prisoner's dilemma" represents a clash of individual versus group interests
  • "dilemma" = a problem for which the solutions all reach a negative outcome
    • as opposed to a "paradox"
• in the prisoner's dilemma, two prisoners must select between 1) confess to the crime or 2) remain silent
  • each is held separately and does not know what the other will choose
• Option 1 choices:
  • Prisoner 1 (P1) confesses
  • Prisoner 2 (P2) remains silent
  • outcome: P1 goes free & P2 serves the worst jail sentence with no chance for parole (no chance to be let out of jail early)
• Option 2 choices
  • P1 remains silent
  • P2 confesses
  • outcome: P2 goes free & P1 serves the worst sentence
• Option 3 choices:
  • both confess
  • outcome: both serve the worst jail sentence but will be allowed "early parole" (let out early)
• Option 4 choices:
  • both remain silent
  • outcome: both will face a lesser charge and less jail time

Prisoner's Dilemma Choice Matrix

Option	Best outcome individually	Worst outcome individually	Worst outcome collectively	Best outcome collectively	Highest risk indivdiually	Lowest risk individually
Option 1: P1 confesses/ P2 remains silent	P1 goes free	P2 serves longest term	✔		✔
Option 2: P2 confesses/ P1 remains silent	P2 goes free	P1 serves longest term	✔		↑
Option 3: both confess				↑
Option 4: both remain silent				↑	↑

• the most potentially beneficial option for themselves individually, they both will serve the longest jail term

• however, if both choose the
  • even if choosing collectively would be more rational & mutually beneficial
• see https://plato.stanford.edu/entries/prisoner-dilemma/

scarcity

• aggregate supply

Supply & demand

• Say's Law
  • from Jean-Baptiste Say, "A Treatise on Political Economy" (Traité d'économie politique), 1803
• states that production is the source of demand
  • production = making things, providing services or things of value)
  • i.e, demand for things necessarily follows their production or offering
    • demand may pre-exist something, but nothing of value is exchanged until that thing is produced and offered
  • Say's law is criticized for ignoring "gluts" (supply exceeds demand) and monetary impacts (such as inflation or deflation, which can impact demand outside of supply)
• in general, Say's law correctly identifies the source of exchanged value: something must be offered for value

Lesson Plans

• Economics & ethics lesson plan