Principles of Microeconomics

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.

 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 don’t understand  Take notes as relevant to learn

 Bring Good attitude + Love of wisdom +Smile (laughter, humor)=> 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.

 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.)

 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

 It’s useful for ◦ Personal Decisions ◦ Business Decisions ◦ Political Decisions  It pays ◦ Economics majors end up making more money on average relative to many other majors

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

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)

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

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 =>income you would earned working OC of big building stadium => other services given up (library, computing, housing services) OC of using land for wild life => other things land can be used for

4. An Example of Constant Opportunity Cost Budget =$5.00; P HD = $0.50; P HAM =$1.00

 What is the OC of the 1 st, 2 nd, 3 rd, 4 th, and 5 th Ham? Hotdogs Ham OC= -2/1 => sacrifice/gain

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.

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

 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).

A. 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.

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

Principle # :8 A Country’s 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