Welcome to Our Homeschool Economics Curriculum

Course Sample

Economics with Mike Sims

Mike Sims, who teaches Economics at Trinity Valley Community College, is the assistant city manager for the city of Terrell, Texas. He makes Economics come alive for students with creative themes ranging from Football Economics to Ski Slope Economics! His SchoolhouseTeachers.com course is located in the Teacher Lesson Archive. Here is one sweet example, perfect for the season.

Chocolate Economics

Week One: Concepts and Definitions

All definitions are taken from the Arnold Textbook or the Sowell Basic Economics Book.

What is economics?

Economics as a formal study grew out of the observation that countries would often go to arms to settle disputes about resource allocation—think feudal kings plundering each other or wars about imperialistic claims. Thus, some began to think that there must be better way to improve material conditions. Adam Smith, in The Wealth of Nations, published in 1776, suggested that perhaps commerce should be used instead of conquest.

Economics (short version) —The science of scarcity

Economics (classic) — Economics is the study of the use of scare resources which have alternative uses.

Economics (official) —The science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants.

Economics (nickname) —The dismal science.

The Consumer Experience

Consumers seek a way to maximize utility, adding as many goods as their resources allow. In a market system, if a consumer desires more goods then they have resources to acquire, then they are forced to provide a benefit of some sort to someone else in the economy in order to obtain additional resources. This incentive encourages participation in the market and wealth generation, two hallmarks of people in capitalist market societies.

Good — A thing from which consumers receive satisfaction or utility.

Bad — A thing from which consumers receive dissatisfaction or disutility.

The Producer Experience

Producers seek a way to combine the four types of resources listed below in order to maximize the return on their investment. The entrepreneur plays the key role of combining the other resources to some efficient means of producing something consumers want. If a second entrepreneur can come up with a better way to produce a similar or a better good for less, then the first entrepreneur will either change or go out of business because he or she will not be serving the public as effectively. This competition forces innovation and efficiency, two hallmarks of firms in capitalist market societies.

Land — all natural resources, such as minerals, forests, water, agricultural land, and other unimproved land

Labor — the physical and mental talents people contribute to the production process

Capital Produced — goods that can be used as inputs for further production, such as factories, machinery, tools, computers, and buildings

Entrepreneurship — the talent that some have for organizing the other resources to produce goods, for identifying new business opportunities, and for developing new ways of doing things

Why trade?

We trade because everything is scarce and people are always seeking a reallocation of resources that is more favorable, with all goods and resources going to their highest and best use. Thus, we need a market-oriented way to decide how to ration scarce resources. Because people compete for scarce resources, every society has to come up with a means of allocating resources. If the market doesn’t reallocate resources, brute force or family connections or imperial fiat may serve to reallocate resources.

Scarcity — the condition in which our wants are greater than the limited resources available to satisfy them

Rationing Device — A means for deciding who gets what of available resources and goods

Opportunity Cost — the most highly valued opportunity or alternative forfeited when a choice is made

Exchange — the process of giving up one thing for another

How much trade?

Since goods and the resources needed to produce them are scarce, we should make trades until what we sacrifice (the opportunity cost) for a marginal unit is equal to the benefits that we get from any trade. People and businesses trade to become better off and stop trading only when the only trades they can afford would make them worse off.

Efficiency — any condition when marginal benefits equal marginal costs

Decisions at the Margin — decision making characterized by evaluating the current situation and weighing the benefits of an additional unit against the costs of an additional unit

Marginal Benefits — the benefits connected with consuming an additional unit of a good or undertaking one more unit of an activity

Marginal Costs — the costs connected to consuming an additional unit of a good or undertaking one more unit of an activity

Conclusion

The human desire for more can fairly be described as insatiable. This drives scarcity and the fact of scarcity drives the notion of opportunity cost. My resources are limited, so I can’t have one thing without giving up another. Since giving up something is painful, we have to measure the benefits versus the cost. This is done on the margin—i.e. the cost of one more unit compared against its benefit.