Principles of Economics Econ 100 (formerly known as Econ 200) Murat Usman Lecture 1 February 4 2013

Lecture plan Feb 4 2013 Syllabus Book. Lecture Notes. Study tips. Exams. Make ups, grading. After Econ100: Econ201 and Econ202 People on the waiting list, priorities Professor İnsan Tunalı My course recommendations Short Intro: what is economics? A very short case study: What would you do if you …

Book Gregory Mankiw (rhymes with thank you) & Mark Taylor, Economics, 2nd ed. 928 pages, 28x22.3cm (big book) Book website: http://cws.cengage.co.uk/mankiw _taylor2/students/stu_title.htm

Do we have to buy the book?

Now the most important part …

Grading Two midterms, one final. Midterm #1: Week 6 (+/- 1 week) Final Exam: will be scheduled by the Registrar’s Office. (May 23 to June 2). MAKE UP exams: not more difficult than regular exams must have a valid excuse. make-up finals scheduled June 3-4.

10% Bonus. For class participation and assignments. 25% Midterm Exam #1. 25% Midterm Exam #2. 40% Final Exam. 10% “Wild Card”. Your best exam grade will be given an added weight of 10%. For example, if you do very well on the final exam it will be weighted at 50%. 10% Bonus. For class participation and assignments.

Class participation and assignments 10-point BONUS In class experiments and activities Short reading/writing assignments Please bring a pen/pencil and a piece of paper to each class.

A common question: I am registered in the 9 30 section A common question: I am registered in the 9 30 section. Can I come to the 11 00 section? Answer: No.

Class participation (not easy!) Please turn off laptops tablets mobile phones etc It is not easy but you can do it Avoid behavior like always coming to class late; keeping steady conversation with neighbors during lecture, doing coursework for others classes, etc. Ask questions, if I ask a question to class try to answer it, in general pay attention to the lecture (most of the time)  

Make ups (must have valid excuse) Lecture Notes. Fairly detailed, regularly updated. But no substitute for lectures Study tips. Study questions: very important, then lecture notes, then the book. Please use the office hours if you need help. Exams Multiple choice questions + a few short answer questions of simple computations. No essays. Make ups (must have valid excuse)

After Econ100 Econ201 Microeconomics Econ202 Macroeconomics Studies the behavior of Individual Consumers and Firms; the demand and supply of individual goods and services. More abstract/mathematical than Econ202 Econ202 Macroeconomics Studies aggregated indicators such as GDP, unemployment, and inflation to understand how the whole economy functions. What we read about in the newspapers watch on TV: economic growth, exports, imports, public budget, inflation, exchange rates, etc.

Recommended ECON.333/MGEC.333     GAME THEORY AND STRATEGY

Econ 100: Goals and objectives Econ100 is one of the very few courses that all Koç Uni students have to take (no alternative) So, I want people to… Be happy Learn some economics Get good grades

A 5 minute lecture on “What is economics?” Now… A 5 minute lecture on “What is economics?”

Economics is about the allocation of scarce resources. Example : Your best friend invites you to a open buffet brunch. Money is no object; you can eat as much as you want for free. Time is not an obstacle; you have all afternoon and would enjoy spending it in the company of your friend. What is the scarce resource here?

If there is scarcity then you have to make choices. The trade-off principle: When there is scarcity, then having more of one good thing means having less of another.

Now something really confusing… Economics starts with the assumption that people have objectives and tend to choose the correct way to achieve them.  More specifically, economics assumes that rational people follow this simple rule: Do activity x if and only if B(x) > C(x), B(x) is the benefit of activity x (to the individual) C(x) is the cost of activity (to the individual)

Now it is your turn

You are the general manager of IL JK company You are the general manager of IL JK company. The company provides extermination services (böcek ilaçlama) and employs some administrative personnel who cannot be fired and 196 workers who do the actual extermination work and can be fired.

History The company started 5 years ago. It is owned by three families. The work requires only a low level of skills so that each worker requires only one week of training. All of the company’s workers have been with the company for three to five years. The company pays its workers more than minimum wage. A worker’s wage, which includes overtime, is between TL 1,200 and 1,500 per month (the minimum wage is about 970 liras). The company provides its employees with all the benefits required by law.

Current situation Until recently, the company was very profitable. As a result of the continuing recession, however, there has been a big decrease in profits though the company is still in the black.

Decision You will soon be attending a meeting with the owners and your management team to decide how many workers to lay off. IL JK’s Finance Department has prepared the following forecast of annual profits:

Data Number of workers who will continue to be employed Expected annual profit in TL, millions 0 (all the workers will be laid off) Loss of 8 50 (146 workers will be laid off) Profit of 1 65 (131 workers will be laid off) Profit of 1.5 100 (96 workers will be laid off) Profit of 2 144 (52 workers will be laid off) Profit of 1.6 170 (26 workers will be laid off) 196 (no layoffs) Profit of 0.4

What is your recommendation? I recommend continuing to employ ______ of the 196 workers in the company. Short justification for you decision: __________ _______________________________________ _______________________________________

Your recommendation: I recommend continuing to employ ______ of the 196 workers in the company. Short justification for you decision: __________ _______________________________________ _______________________________________