Managerial Economics Topic 1 – Ground Rules for the Course & Introduction to the Economic Way of Thinking or what are we doing here and why? Course material. Text WSJ What we will do the next ten weeks. Attendance. Exams. Presentations. Networking.

Apply Economics to Business Issues Why ? Give your employer and subordinates incentives to do what you want Predict the consequences of your choices Evaluate the costs and benefits of your opportunities Understand the effects of government policies Raise your income/wealth Reduce Shirking

Review Syllabus Book WSJ Quiz (1) Attendance?? Presentations – Teams Networking Dates Final

Class Rules Attendance????? – Woody Allen – Success is 90% showing up” Stay in touch and know what to stay in touch about Don’t interfere with the learning of your fellow students Mid term date will be announced. Project will be Team , Professor, and Team Leader Graded

Micro & Macro Mostly Micro Early Economists did not think of Micro and Macro as different subjects – this starts with Keynes One day of macro & International World developments Historical perspectives

Scarcity Limited Resourses Unlimited Wants Scarcity creates conflicts Therefore choices have to be Made Something must be given up

Making Decisions What How For whom

Organizing this Decision making Markets Commands/Planning Tradition

Competition (its everywhere) The outcomes depend on the rules Choices – thus discrimination can not be avoided. Ex anti v.s. Ex post equality “I object to discrimination” = I do not like the rules Scarcity means discrimination MUST occur because every choice discriminates Redistribution - Rawls Text Text Text Text

The Economic Way of Thinking Look to Market Property Rights Legal System Trade Property Rights Very Important Takings Self Interest (Public Interest) Clarifying Options Opportunity Cost Txt Text Text Text Text Text Text Text

The Economic Way of Thinking Marginal Analysis Individualistic Applicable Everywhere Comparative Advantage Text Text Txt Text Text Text Text Text

THEORY - Methodology Assumptions Model Hypothesis Empirical Test

Methodology - More Positive Normative It takes a theory to beat a theory