ECONOMICS 2420

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ECONOMICS 2420

• Principles of Microeconomics

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Important Information

• E-mail Communication- Use mtmail or D2L for all
  communications pertaining to the this course.
• Use of cellphones or other electronics gadgets
  are not allowed because it is a distraction to
  your neighbor and me. Please turn them off
  during class period at all times.
• We have MA and Ph. D students who can answer most
  your questions during lab hours, if you need them.

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A conducive Learning Environment

• Come to class on time and stay until it is over
• Turn off your cell phones during class period at
  all times
• Come to class with a purpose to learn economics
• Ask questions, if you dont understand
• Take notes as relevant to learn

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A conducive Learning Environment

• Bring Good attitude Love of wisdom Smile
  (laughter, humor)gt conducive learning
  environment.
• Learning and teaching are a two way process.
• I pledge to do my best to make the course
  relevant and I request that you also do your part
  to make the course successful.

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Why Study Economics? 3Reasons

• Helps individuals to make rational choices or
  decisions for maximizing their welfare
  (satisfaction). Some examples include
• (major, working vs attending school, allocating
  time to different activities, choosing a mate,
  making informed decisions in civic duties,
  evaluating economic platform of candidates for
  public office, etc.)

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Why Study Economics?

• Guides companies (firms) to make efficient
  resource allocation decisions to maximize profit
• Helps non-profit organizations (schools,
  hospitals, museums, churches, etc. to maximize
  service to their clients

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Why Study Microeconomics?

• Its useful for
• Personal Decisions
• Business Decisions
• Political Decisions
• It pays
• Economics majors end up making more money on
  average relative to many other majors

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2008 Average Starting Salaries

• Major Salary
• Computer Science 56,921
• Engineering 56,336
• Economics 52,926
• Nursing 52,129
• Chemistry 52,125
• Finance 48,795
• Accounting 47,413
• Bus./Mgt 43,823
• Source MSN Careers mancareerbuilder.com

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1. What is economics all about ?

• It deals with
• a. scarcity of productive resources
• -Labor (doctors, lawyers, teachers, etc.)
• -Capital ( physical financial )
• -Land ( minerals, petroleum )
• -Management or Entrepreneurship (CEO)
• b. choices ( individual, regional, national,
• and international levels)

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1. What is economics all about ?

• c. Efficiency - getting the most output from
  scarce resources
• d. Equity fair distribution of benefits or
  goods and services.
• Economics is the study of mankind in the ordinary
  business of life ( Alfred Marshall-1791)
• Allocation of parking spaces, deciding how many
  credit hours to take, deciding what to major
  (business vs LA, Sciences) considering career
  opportunities, working or going to school, etc.
  are all economic decisions

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Economic Problem

• 2. The economic problem arises from the unlimited
  human wants relative to limited resources.
• 3. The scarcity - choice - opportunity cost
  framework. Because of scarcity, we must make
  choices and the choices we make entail costs (OC)
  
• 4. Opportunity cost - the value of the best
  foregone alternative.
• Examples OC of going to school gtincome you
  would earned working
• OC of big building stadium gt other services
  given up (library, computing, housing services)
• OC of using land for wild life gt other things
  land can be used for

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4. An Example of Constant Opportunity
Cost Budget 5.00 PHD 0.50 PHAM1.00
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A Case of Constant OC

• What is the OC of the 1st , 2nd, 3rd , 4th, and
  5th Ham?

Hotdogs
10
8
OC -2/1 gt sacrifice/gain
6
4
2
Ham
5
0
1
2
3
4
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A Case of Constant OC

• Note 1) the opportunity cost of each additional
  hamburger is the 2 hotdogs which must be given
  up. This is a case of constant OC.
• Note 2) A constant OC implies prefect
• substitution of resources. Not realistic in
  
• many instances.

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5. Every society must answer three basic
questions.

• What to produce? ?Consumers
• How to produce? ?Firms
• Who gets the goods and services produced? ?
  Market and Social Policy

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6. Mechanisms of resource allocation

• Market forces of supply and demand.
• State makes the resource allocation in a command
  economy.
• Market and state make resource allocation
  decisions (US and others).

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7. Ten Principles of Economics (Mankiw)

• How People Make Decisions?
• Principle 1 People Face Tradeoffs
• Principle 2 The Cost of Something is What
  
• You Give Up to Get It
  (OC).
• Principle 3 Rational People Think at the
• Margin.
• Principle 4 People Respond to
  Incentives.

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B. How people Interact

• Principle 5 Trade Can Make Everyone
• Better Off.
• Principle 6 Markets are Usually a Good
• Way to Organize
  Economic
• Activity.
• Principle 7 Governments Can Sometimes
• Improve Market
  Outcomes

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C. How the Economy as Whole Works

• Principle 8 A Countrys Standard of living
• Depends on Its Ability to
  Produce
• Goods and Services
• Principle 9 Prices Rise When the Government
• Prints Too Much Money
• Principle 10 Society Faces a Short-Run
• Tradeoff Between
  Inflation and
• Unemployment