Title: Microeconomics Principles
1- Microeconomics Principles
- A. Goodman
2The course
- Class Meets TTh 935 1050, 100 Gen. Lectures
- Office Hours TTh 11 12, MW 10-12 or by
appointment - Office location 2145 FAB
- Phone 577-3235 e-mail allen.goodman_at_wayne.edu
- Department and Course Web site
http//www.econ.wayne.edu/agoodman/ - Also some material on Blackboard
3Text materials
- The text materials will be
- Principles of Microeconomics, 3rd Ed., by N.
Gregory Mankiw, to be purchased at the
appropriate bookstore or on-line. - Make sure you get the Micro split.
4Exams and Grading
- Students will be responsible for the following
assignments - 3 mid-term exams _at_ 15 45
- 1 final exam 30
- Quizzes 15
- Attendance 10
- Intermittent Extra Credit
- Friday night YYY, 630 830 pm
5Teaching Assistants
- Susanne Buesselmann and Meihua Lu.
- Theyre smarter than I am so you should listen
to them. - They speak for me and vice versa.
6The Curve
For some curricula, a grade below C- is
considered a failing grade.
7What does it cost you to come to WSU?
- Think carefully.
- What do you GIVE UP in order to come here?
These are costs!
8- Ten Principles of Economics
9Economy. . .
- . . . The word economy comes from a Greek word
for one who manages a household.
10TEN PRINCIPLES OF ECONOMICS
- A household and an economy face many decisions
- Who will work?
- What goods and how many of them should be
produced? - What resources should be used in production?
- At what price should the goods be sold?
11TEN PRINCIPLES OF ECONOMICS
- Society and Scarce Resources
- The management of societys resources is
important because resources are scarce. - Scarcity. . . means that society has limited
resources and therefore cannot produce all the
goods and services people wish to have.
12TEN PRINCIPLES OF ECONOMICS
- Economics is the study of how society manages its
scarce resources.
13TEN PRINCIPLES OF ECONOMICS
- How people make decisions.
- People face tradeoffs.
- The cost of something is what you give up to get
it. - Rational people think at the margin.
- People respond to incentives.
14TEN PRINCIPLES OF ECONOMICS
- How people interact with each other.
- Trade can make everyone better off.
- Markets are usually a good way to organize
economic activity. - Governments can sometimes improve economic
outcomes.
15TEN PRINCIPLES OF ECONOMICS
- The forces and trends that affect how the
economy as a whole works. - The standard of living depends on a countrys
production. - Prices rise when the government prints too much
money. - Society faces a short-run tradeoff between
inflation and unemployment.
16Principle 1 People Face Tradeoffs.
- There is no such thing as a free lunch!
17Principle 1 People Face Tradeoffs.
- To get one thing, we usually have to give up
another thing. - Guns v. butter
- Food v. clothing
- Leisure time v. work
- Efficiency v. equity
Making decisions requires trading off one goal
against another.
18Principle 1 People Face Tradeoffs
- Efficiency v. Equity
- Efficiency means society gets the most that it
can from its scarce resources. - Equity means the benefits of those resources are
distributed fairly among the members of society.
19Principle 2 The Cost of Something Is What You
Give Up to Get It.
- Decisions require comparing costs and benefits of
alternatives. - Whether to go to college or to work?
- Whether to study or go out on a date?
- Whether to go to class or sleep in?
- The opportunity cost of an item is what you give
up to obtain that item.
20Principle 2 The Cost of Something Is What You
Give Up to Get It.
- Basketball star Lebron James chose to skip
college and go straight from high school to the
pros where he has earned millions of dollars.
21Principle 3 Rational People Think at the Margin.
- Marginal changes are small, incremental
adjustments to an existing plan of action.
People make decisions by comparing costs and
benefits at the margin.
22Principle 3 Example
- Is my first hamburger at a meal worth it?
- How about my second?
- My third?
- My fourth?
- And how about whatever Im using to wash it down
???
23Back to Hamburgers!
24Principle 4 People Respond to Incentives.
- Marginal (incremental) changes in costs or
benefits motivate people to respond. - The decision to choose one alternative over
another occurs when that alternatives marginal
(incremental) benefits exceed its marginal
(incremental) costs!
25Principle 5 Trade Can Make Everyone Better Off.
- People gain from their ability to trade with one
another. - Competition results in gains from trading.
- Trade allows people to specialize in what they do
best. - QUESTION
- Do you produce EVERYTHING you need?