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Microeconomics Principles

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Title: Microeconomics Principles


1
  • Microeconomics Principles
  • A. Goodman

2
The 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

3
Text 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.

4
Exams 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

5
Teaching Assistants
  • Susanne Buesselmann and Meihua Lu.
  • Theyre smarter than I am so you should listen
    to them.
  • They speak for me and vice versa.

6
The Curve
For some curricula, a grade below C- is
considered a failing grade.
7
What 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

9
Economy. . .
  • . . . The word economy comes from a Greek word
    for one who manages a household.

10
TEN 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?

11
TEN 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.

12
TEN PRINCIPLES OF ECONOMICS
  • Economics is the study of how society manages its
    scarce resources.

13
TEN 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.

14
TEN 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.

15
TEN 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.

16
Principle 1 People Face Tradeoffs.
  • There is no such thing as a free lunch!

17
Principle 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.
18
Principle 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.

19
Principle 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.

20
Principle 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.

21
Principle 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.
22
Principle 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
    ???

23
Back to Hamburgers!
24
Principle 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!

25
Principle 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?
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