1. Principles of Microeconomics
Welcome to PACE Econ 1
Principles of Microeconomics

2. Index Card Front-side (lined) Back-side
ECON 1/T 6:00pm
Name (Underline what you go by)
Phone number
(Print Clearly)
Major/option
Hobbies
Favorite book
Back-side
Occupation, if currently working
Your expectations 6 years from now
Any message you want to give me

3. Instructional Information
9 hour / Week Course of Study
Path to Success
Read chapters before Discussion session
Download and review Classnotes & Powerpoints (Bring to Class)
Discussion sessions: The Conversation
Definitions: Flash Cards
Topical Reviews

4. ECONOMICS
Economics is a Science that analyzes how Individuals behave, in a world of Scarcity.

5. Science is Objective or Positive
Positive: Describes what is or will be
Objective
Factual
Testable
Descriptive
Normative: Describes what should or ought to be
Subjective
Contains a value judgement
Opinion

6. Construction of Theory
Abstractions
Definitions

7. Definitions: Words to describe reality
Children learn words in pairs
( in ) ( out )
( up ) ( down )
( left ) ( right )
( Hot ) ( Cold )
Alternative perspective: The world exists in a continuum

8. Definitions break up the continuum into parts
Red Yellow Blue
Orange Green
Red Orange Yellow Green Blue Indigo Violet

9. Economic Analysis Looks at small degrees of Change
Marginal: Additional: One more…
Marginal Value: Additional Value of having one more
Marginal Revenue: Additional revenue from one more.
Marginal Cost: Additional cost of one more

10. Construction of Theory
Abstractions
Definitions
Assumptions
Implications
Adoption of Theory

11. A Good Is Anything, That an Individual Wants to Have More Of, at Zero Price.
Anything : Material or Non-material
An individual wants
Have More of
At Zero Price

12. Resource: Anything that can be used to produce Goods.
Land = all its attributes
Labor = People
Capital = Buildings & Equipment

13. Assumptions Humankind has unlimited wants Our resources are limited
Scarcity : Individually, and as a Society, we do not have enough resources to produce all the things we want.

15. Implications of Scarcity
Choice: people must choose which goods to acquire.
Economic Cost: The Cost of any action, is the personal value of the next highest valued alternative given-up.
Competition: We are in a state of competition for the use of resources

16. Forms of Competition in Society
Violence, or Threat of Violence
Social/Political : competition on the basis of some limited behavior or characteristic
Economic/Market: competition based on offering the highest value in exchange.

17. Primary Social Goal = Fairness
Violence: not fair.
Social political: not fair.
Economic: not fair,
Life is NOT FAIR !!
But, the market offers the broadest and most fair system

18. What Economics Is About
Microeconomics: decisions of individuals and firms: what to buy and what to produce.
Macroeconomics: the whole economic system and the role of government.

19. Mechanisms of Choice Political: our representatives make choices
Economic/market: individuals and firms make choices based on relative prices about what to produce

20. Circular Flow Diagram of the Exchange Economy
Goods &
Services
Product
Markets
Goods &
Services
$'s
$'s Revenue
HOUSEHOLD
FIRMS
$'s
$'s Income
Inputs
Resources
Resource
Markets 20

21. Circular Flow Diagram of the Exchange Economy
Households: Decisions: What to sell? What to buy? Assume Maximize Utility
Firms: Decisions: What inputs to use? What to produce? Assume Maximize Profits.
Markets: Factor Markets, Product Markets
Role of Money: The medium of exchange

22. Scarcity  Society Choices
What to produce? Goal find the mixture of outputs that maximizes society’s value.
How to produce? Goal: find the optimal mix of inputs to maximize technical output.
For whom to produce? Who will get to consume the goods produced.