BELL RINGER

• In your JOURNALS, define the word “INCENTIVES.” Remember to draw your “frame of reference.”

SSEPF1a

• SSEPF1 The student will apply rational decision making to personal spending and saving choices.

• a. Explain that people respond to positive and negative incentives in predictable ways.

Economic Decision Making

Unit 1 Lesson 2 (ECON-U1-L2): Incentives and Rational Decisions

GROUP ACTIVITY

• Get into groups of 3-4. Please note that next week groups will be assigned, not chosen.

WHO WANTS A BLOW POP?

• How many of you would like this item today?

• One student in each group will leave today with a blow pop in hand.

SCARCITY

• The blow pops in my possession are scarce because they are both limited and desired by the students in this class.

• Both individuals and societies must devise ways to deal with this problem of scarcity.

• This is exactly what you will be doing in today’s lesson.

• I have only a limited number of each item to allocate today; there are no more.

HOW DO I DECIDE?

• How will I determine who among you will receive a blow pop?

• In your groups, generate a list of all the different ways you can think of for me to determine who gets the item in your group.

• You have 5 minutes….

WAYS TO DECIDE…

• Most push ups• Lightest phone• Highest GPA• Youngest• Oldest• Rock paper scissors• Fired! • Longest hair• First in class• Most socks• Biggest foot

• Best cook• Jump farthest• Talks most• Longest nails• ABC’s backward• Best job• Shoots best• Band• Laughs most• Most fb friends• Most tweets• Shortest

WAYS TO DECIDE…

• Rock paper scissors• most talented• Youngest• Pick a card• Sky blue• Biggest shoe• Fastest• Draw straws• Most athletic• funniest• Pick a number 1-10

• Eeny meeny miny moe• Ugliest• Braces• Smallest foot• Most skilled• Good at board games• Best grades• Best baby stuff• Lolli law• Best personality• Volunteers most• Best attitude

OPPORTUNITY COST

• Economics stresses the importance of people making decisions in a careful way.

• This allows people to know what they are giving up when they choose among alternatives.

• The best alternative that you give up when you make a decision is called the opportunity cost.

• Economics can provide a great way to help your group decide how to allocate your good.

THE PACED DECISION-MAKING MODEL

• Now that the class has helped me create a list of possible allocation methods, you will use the PACED model to determine who will really get the blow pop good in your group.

P.A.C.E.D.• P. What is the PROBLEM?

• What decision are your trying to make?• What is the issue at hand?

• A. What are the ALTERNATIVES?• What actions are you considering?• What options are available to you in this decision?

• C. What are the CRITERIA important to the decision?• What characteristics are you looking for in your result?• Which criteria are more important than others? How do you rank them?

• E. EVALUATE each alternative.• Evaluate each alternative on the basis of each criterion.• Give each alternative a plus (+) or a minus (-) according to how well it meets each

criterion.

• D. Make a DECISION.• Calculate the net value of each alternative; which alternative best meets your highest-

ranking criteria?• What do you gain with each alternative?• What do you give up with each alternative?

So…

• What is the problem…– Deciding who will get the good in each group.

• What are the alternates…– Everything the class suggested that we listed

on the board.

PACED DECISION-MAKING GRID

• To streamline the PACED process, each group should select the five alternatives from the class list that they believe to be the best.

• You should list these five alternatives in the space provided on your handout.

Priorities…

• What criteria are important to you in making this decision?

• Which four criteria do you deem most important?• List these criteria at the top of your decision-

making grids. • How should these criteria be ranked?• Rank order the criteria on your grids by giving a

score of 1 to your top criterion, 2 to your next most important and so on.

EVALUATE THE ALTERNATIVES

• Now, tell me how you should evaluate the alternatives.

• If your group decides that an alternative successfully meets a criterion, you should put a plus (+) in the appropriate square on your grid.

• If you feel an alternative does not meet a certain criterion you should put a minus (-) in that box.

• Evaluate each of your five alternatives on the basis of each of your four criteria.

DECISION TIME!

• Calculate the net value (number of pluses less number of minuses) of each alternative on your grid.

• Then allocate the item to the person you chose through your decision-making process.

• Explain who got the good and how the decision was made. What criteria was most important to you in making your final decision?

ECONOMIC SYSTEMS ACTIVTY…

• There are different ways of classifying economic activities.

• Each type of economic system represents a different set of rules for economic behavior.

• Knowing the different classifications will help you recognize differing forms of economic activity.

• Societies often have similar decisions to make regarding goods and services such as health care, environmental activity, education and housing.

ECONOMIC SYSTEMS

• Traditional Economies

• Market Economies

• Command Economies

TRADITIONAL ECONOMIES

• Decisions about what to produce, how to produce and to whom goods and services will be allocated generally repeat decisions made in earlier times or by previous generations.

• Continuity and stability are valued in economic life.

MARKET ECONOMIES

• Individuals and businesses own productive resources and make the decisions about what to produce, how to produce and to whom goods and services will be allocated.

• The market prices that result from individual and business decisions act as signals to producers, telling them what buyers want.

• Goods and services are allocated on the basis of prices.

COMMAND ECONOMIES

• An authority such as a feudal lord, a government agency or central planners decide what to produce, how to produce and to whom goods and services will be allocated.

WHERE DO YOU FALL?

• Categorize the group-allocation decisions you made by the type of system your process most closely resembles.

CLOSURE

• The PACED model is a very useful tool that you can use to make decisions about important issues affecting society and about personal problems that affect your own life.

• Personal problems include what to do with spare time on the weekend, which movie to see, which part-time job to take or where to go to dinner before the prom.

• Social problems include issues such as which immigration policy a nation should adopt, whether a city should raise its property taxes, whether a school district should build a new high school or what the legal minimum drinking age should be.

EXIT TICKET

• As a class, lets select a current economic issue of interest to us.

• Groups should use the PACED model to make a decision about the issue.

• Compare and discuss your group’s results to that of the others and review the steps of the economic decision making process.

EXIT TICKET/ESSENTIAL Q.

• ANSWER THE FOLLOWING IN YOUR JOURNALS OR ON A SEPARATE SHEET OF PAPER (remember get Journals for Monday!)

• WHAT ARE INCENTIVES? HOW DO PEOPLE RESPOND PREDICTABLY TO NEGATIVE AND POSITIVE INCENTIVES?