Introduction to Economics

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IntroductiontoEconomics

• Dr. Dennis Foster

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Economics

• A framework for understanding. . .
• Scarcity
• Choices
• (Opportunity) Costs

Unlimited Wants
Limited Resources
Premise Rational self-interest
i.e., human action is not random it is
purposeful.
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Choices involve Opportunity Costs

• Making tradeoffs
• Weighing costs and benefits
• The value of the next best choice
• Attending class . . .Affordable Care Act . . .
• Every person/group/society makes choices.
• TANSTAAFL look it up.

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Choices must be made

• What will be produced?
• How will it be produced?
• Who will get what is produced?
• Efficiency -
• the measure of how well we answer
• these questions.

First choice markets
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Methodology of Economics

• Use of logical reasoning.
• Assumption that all else is equal.
• Decisions are made at the margin.
• Theories cannot be proved.
• Some rely on logic others on data.
• Beware of logical fallacies.
• Use of models.
• Descriptive models
• Graphical models
• Mathematical models

Ceteris paribus
Non sequitur
Anecdotes
Post hoc
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Graphing

• A picture is worth a thousand words . . .

What is Q?What is K?What is L? What is the
cause and what is the effect? How to we move
from A to B?
Classic Production Function QOutput,
KCapital LLabor
How do we move from A to C? How do we move from B
to D? What is Q if K is zero?
How are K Q related (/-)? What is the nature
of that relationship? If K doubles, Q will do
what?
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IntroductiontoEconomics

• Dr. Dennis Foster