2. Welcome To Avia 3040 Aviation Economics Faculty: Dr. Munir Mahmud Office: Hazy 342 Phone: (435)652-7626 E-mail: mahmud@dixie.edu Office Hours: MWF 11–12:45 pm. & By Appointments

3. Text Book: Principles of Economics, 6th Edition, 2010 – South Western Cengage Learning. ISBN: 978-1-426-64835-9 Prerequisites: None

4. Grading: © 4 Take Home Assignments. © 4 In-Class Exams. © Final Take Home Exam. Make-UP Policy: Make-UP Policy: Unless there is a compelling reason, no “Make-up” exam will be given. Late assignments will be subject to a 30% point deduction.

5. Distribution of Points: Take Home Assignments (4)10% each In-Class Exams (4)10% each Final Take home Assignment 20% ----------------------------------------------------------- Total100%

6. How would the point grade be converted into a letter grade? General Rule: 100-90 = A72-70 = C 89-87 = A-69-67 = C- 86-83 = B+66-64 = D+ 82-80 = B63-60 = D 79-77 = B- 59-57 = D- 76-73 = C+Below 57 = F

7. Academic Integrity: own efforts All students are expected to act with civility, personal integrity; respect other students' dignity, rights and property; and help create and maintain an environment in which all can succeed through the fruits of their own efforts. An environment of academic integrity is requisite to respect for self and others and a civil community.

8. cheatingcopying plagiarizingsubmitting another persons' work as one's ownusing Internet sources without citationfabricating field data or citations, "ghosting Academic integrity includes a commitment to not engage in or tolerate acts of falsification, misrepresentation or deception. Such acts of dishonesty include cheating or copying, plagiarizing, submitting another persons' work as one's own, using Internet sources without citation, fabricating field data or citations, "ghosting" (taking or having another student take an exam), stealing examinations, tampering with the academic work of another student, facilitating other students' acts of academic dishonesty, etc.

9. Academic dishonesty violates the fundamental ethical principles of the University community and compromises the worth of work completed by others. A student should avoid academic dishonesty when preparing work for any class. F for the assignmentF for the course Sanctions for breaches of academic integrity may range (depending on the severity of the offense) from F for the assignment to F for the course. In severe cases of academic dishonesty, including, but not limited to, stealing exams or "ghosting" an exam, students may be expelled from the college.

10. Disability: Disability Resource Center (652-7516)Student Services Center "If you are a student with a medical, psychological, or learning disability or think you might have a disability and would like accommodations, contact the Disability Resource Center (652-7516) in the Student Services Center. The Disability Resource Center will determine eligibility of the student requesting special service and determine the appropriate accommodations related to their disability. It is encouraged that students requesting accommodation do so within the first two weeks of classes, so that, once identified, a reasonable accommodation can be implemented in a timely manner.

11. Your Rebel Mail Account: DSC billfinancial aid/scholarship notices www.dixie.edu Important class and college information will be sent to your Rebel mail email account. This information includes your DSC bill, financial aid/scholarship notices, notification of dropped classes, reminders of important dates and events, and other information critical to your success in this class and at DSC. All DSC students are automatically assigned a Rebelmail email account. If you don’t know your user name and password, go to www.dixie.edu and select “Rebelmail,” for complete instructions. You will be held responsible for information sent to your Rebelmail email, so please check it often. www.dixie.edu

12. Lecture: 1 Chapter 1: Introduction Natural Resources: The land, water, metals, minerals, animals, and other gifts of nature that are available for producing goods and services.

13. Renewable Natural Resources: © Our supply of forests. © Sea and land animals. © Water and Grasses. Question: Question: Are renewable natural resources inexhaustible?

14. Nonrenewable Natural Resources: © Metal and Mineral Resources. Insatiable Wants: WantNeed Demand Things we desire. Things we require. Wants that are backed by purchasing power.

15. Scarcity and Economics What is Economics? scarce resources unlimited wants distribute Economics is the study of how we work together to transform scarce resources into goods and services to satisfy the most pressing of our unlimited wants, and how we distribute these goods and services among ourselves.

16. Economics as a part of Social Science: Consumer Sovereignty: The ability of consumers to exercise complete control over what goods and services the economy produces (or does not produce) by choosing what goods and services to buy (or not buy). Sociology, Anthropology, Political Science and Psychology

17. Economics Focuses on 4 Central Issues: 1. 1. Who produces what? 2. 2. How it is produced? 3. 3. Who consumes? 4. 4. Who decides?

18. Economic Model: abstract from reality It is a simplified representation of complex economic relationships. Sometimes to untangle the complexities of the relationship, economists have to abstract from reality. Ceteris Paribus The Assumption of Ceteris Paribus: Everything else is remaining the same It means, “Everything else is remaining the same”.

19. The Circular Flow Model: Labor, Land, Capital & Entrepreneurship. Goods and Services. Resource Market Product Market Wages, Rent, Interest & Profit Consumer spending for goods & services

20. Micro and Macro Economics Microeconomics: Microeconomics: It studies the behavior of an individual household, firm or even industry. Macroeconomics: It Macroeconomics: It focuses on the behavior of the economy as a whole.

21. Positive and Normative Economics: Positive Economics: economy actually operates A subset of Economics that analyzes the way economy actually operates (a factual statement). Normative Economics: what ought to be A subset of Economics founded on value judgements and leading to assertions of what ought to be.

22. Chapter 2 Production Possibilities and Opportunity Costs

23. This chapter discusses principles associated with Division of Labor and Specialization Technological Change and Economic Growth The Law of Increasing Costs Opportunity CostsProduction Possibilities Factors of Production Absolute and Comparative Advantage

24. What are the Factors of Production? u Labor u Capital u Land u Entrepreneurship

25. What is Labor? The physical and intellectual effort of people engaged in producing goods and services

26. What is Capital? Manufactured makemarket Manufactured goods used to make and/or market other goods and services

27. What is Human Capital? The knowledge and skills acquired by labor, principally through education and training

28. What is Land? A natural-state resource such as real estate, grasses and forests, and metals and minerals

29. Who is an Entrepreneur? A person who alone assumes the risks and uncertainties of a business He is also the person who takes the initiative and comes up with the essential idea of the business.

30. What is Production Possibilities? In order to understand what is meant by PPF, we would first consider a hypothetical economy. Production Possibilities Frontier

31. Robinson Crusoe’s Production Possibilities:

32. Consumption Goods Capital Goods 0 12345678 9 1 2 3 4 5 6 7 8

33. Production Possibilities? The combinations of goods that can be produced when resources and technology are used fully & efficiently

34. Consumption Goods Capital Goods 0 12345678 9 1 2 3 4 5 6 7 8

35. Production Possibilities Curve Capital Goods Unattainable Inefficient Consumer Goods 34

36. What is true along the Production Possibilities Curve? u available resources are used fully u most efficient combination of resources

37. What choices are made along the Production Possibilities curve? To have more of one product, units of the other product have to be given up

38. Opportunity Cost: The quantity of other goods that must be given up to obtain a good

39. Law of Increasing Costs: u The opportunity cost of producing a good increases as more of the good is produced

40. Consumption Goods Capital Goods 0 12345678 9 1 2 3 4 5 6 7 8

41. How do we have more of everything? By increasing our resources

42. Increased Resources Increased Resources Capital Goods Consumer Goods 41

43. What other ways can we increase our PPF? u Innovations - an idea that takes the form of new applied technology Technology - an improvement in capital

44. Innovations Innovations Capital Goods Consumer Goods 43

45. Consumption Goods Capital Goods 0 12345678 9 1 2 3 4 5 6 7 8 0 12345678 9 1 2 3 4 5 7 8 6 Once Rich it is Easier to Get Richer Once Poor it is Easy to Stay Poor Rich Country Poor Country

46. Consumption Goods Capital Goods 0 12345678 9 1 2 3 4 5 6 7 8 The Indestructible Nature of Ideas

47. Does division of labor increase productivity? Yes. People become more proficient in one activity which results in greater output per person Specialization of labor : The division of labor into specialized activities.

48. Adam Smith: “One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations, to put it on is a peculiar business,...........” 48,000 pins 200 The reason for such division of labor, he noted, is that these 10 people could make as many as 48,000 pins in a day. If they had each worked separately and independently, they could not have produced more than 200.

49. Production of Fish & Shirts per 8-hour Day Example 1:

50. Absolute Advantage: u A country’s ability to produce a good using fewer resources than the country with which it trades The Theory of Absolute Advantage states that a country should completely specialize and produce the good in which it has absolute advantage.

51. Production of Fish & Shirts per 8-hour Day Example 2: In Crusoe Island,1 Fish = 1 Shirt In Crusoe Island, 1 Fish = 1 Shirt In Yakamaya1 Fish = 2/8 = 1/4 Shirt In Yakamaya, 1 Fish = 2/8 = 1/4 Shirt& 1 Shirt = 4 Fish 1 Shirt = 1 Fish & 1 Shirt = 1 Fish 1 S1 F 4 F1/4 S International Exchange Rate, 1 Shirt = 2 Fish

52. Comparative Advantage: u A country’s ability to produce a good at a lower opportunity cost than the country with which it trades The Theory of Comparative Advantage states that a country should completely specialize and produce the good in which it has comparative advantage.

53. What should a country specialize in producing? In those goods and services in which it has a comparative advantage

54. Should a country produce that with which it has an Absolute Advantage? No! Not unless it also has a comparative advantage in those goods and services

55. Why? u Because by so doing its opportunity costs may be too high

56. Production of Fish & Shirts per 8-hour Day Example 3: In Crusoe Island In Crusoe Island, 1 Fish =.4 Shirt In Yakamaya In Yakamaya, 1 Fish = 2/8 = 1/4 Shirt & & 1 Shirt = 4 Fish & & 1 Shirt = 2.5 Fish.4 S2.5 F 4 F.25 S International Exchange Rate, 1 Shirt = 3 Fish

57. Chapter 3 Demand and Supply

58. What is the Law of Demand? quantity demanded When price increases the quantity demanded decreases

59. What is a Demand Schedule? Shows the specific quantity of a good or service that people are willing and able to buy at different prices

60. PriceQuantity Demanded Price Quantity Demanded $100 $10 0 $91 $9 1 $82 $8 2 $73 $7 3 $64 $6 4 $55 $5 5

61. What is a Demand Curve? Graphically depicts the relationship between price and quantity demanded

62. D e m a n d C u r v e P1 Q1 P2 Q2 Price Quantity

63. Individual Demand Curves for Fish Claudia’s Demand for Fish 7 0 12345678 9 1 2 3 4 5 6 8 10 9

64. Individual Demand Curves for Fish Chris’s Demand for Fish 7 0 12345678 9 1 2 3 4 5 6 8 10 9

65. What is Market Demand? The horizontal sum of all individual demands in a market The horizontal sum of all individual demands in a market

66. Market Demand Curve: Individual 1 P1P1 Q1Q1 Individual 2 P1P1 Q2Q2 Market Demand P1P1 Q 1 +Q 2 P2P2

67. Price Quantity 7 0 12345678 9 1 2 3 4 5 6 8 0 12345678 9 1 2 3 4 5 7 8 6 Market Demand Curve Claudia’s Demand Chris’s Demand 10 9 9

68. Price Quantity 0 12345678 9 1 2 3 4 5 6 7 8 Market Demand Curve 10 9

69. Gottheil 2e Comprehensive (Exhibit 3.1), Micro (Exhibit 3.1), Macro (Exhibit 3.1) ©2000 South-Western College Publishing Individual Demand Curves for Fish 8

70. Gottheil 2e Comprehensive (Exhibit 3.2), Micro (Exhibit 3.2), Macro (Exhibit 3.2) ©2000 South-Western College Publishing The Market Demand Curve 9

71. What is a Supply Schedule? Shows the specific quantity of a good or service that suppliers are willing and able to provide at different prices

72. PriceQuantity Supplied Price Quantity Supplied $50 $5 0 $61 $6 1 $72 $7 2 $83 $8 3 $94 $9 4 $105 $10 5

73. What is a Supply Curve? Depicts the relationship between price and quantity supplied

74. Supply Curve Supply Curve P1 Q1 P2 Q2 Price Quantity S

75. What is Market-Day Supply? A market situation in which the quantity of a good supplied is fixed, regardless of price

76. Market-Day Supply Curve for Fish Supply Schedule for Fish for the Market-Day 7 0 12345678 9 1 2 3 4 5 6 8 10 9 Quantity (1,000) Price

77. Supply Curve Supply Curve S P1 Q P2 76

78. Market Demand Curve for Fish Demand Schedule & Curve for Fish: 7 0 12345678 9 1 2 3 4 5 6 8 10 9 Quantity (1,000) Price Excess Supply Excess Demand Equilibrium

79. What is Equilibrium Price? The price that equates the quantity demanded and the quantity supplied

80. Price Quantity 0 12345678 9 1 2 3 4 5 6 7 8 Market-Day, Short-Run and Long-Run Supply 10 9 Market-Day Supply Short-Run Supply Long-Run Supply

81. Short-Run: The time interval during which suppliers are able to change the quantity of some but not all the resources they use to produce goods and services. Long-Run: The time interval during which suppliers are able to change the quantity of all the resources they use to produce goods and services.

82. D S P3 Q3 P1 Surplus P2 Shortage 81 Or Excess Supply Or Excess Demand

83. Fish Market with change in Demand:

84. Price Quantity 0 12345678 9 1 2 3 4 5 6 7 8 Market Demand Curve 10 9 S D

85. Fish Market with change in Demand:

86. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand: 10 9 S D D'

87. Fish Market with change in Demand:

88. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Decrease in Demand: 10 9 S D D"

89. Change in Quantity Demanded: A change in quantity demanded of a good that is caused solely by a change in the price of that good. Change in Demand: A change in quantity demanded of a good that is caused by factors other than the price of that good.

90. Factors that cause changes in Demand:  Changes in Income.  Changes in Taste.  Changes in the Prices of Other Goods.

91. Substitute Goods: decreases), decreases Goods that can replace each other. When the price of one increases (decreases), the demand for the other increases (decreases). Complementary Goods: Goods that are generally used together. When the price of one increases (decreases), the demand for the other decreases (increases)

92. Factors that cause changes in Demand:  Changes in Income.  Changes in Taste.  Changes in the Prices of Other Goods.  Changes in the expectations about future prices.  Changes in the population size.

93. Quantity Price 0 P1P1 P2P2 Q1Q1 Q2Q2 Change in Quantity Demanded

94. Quantity Price 0 P1P1P1P1 Q1Q1Q1Q1 Q2Q2Q2Q2 Change in Demand D D1D1D1D1

95. Fish Market with change in Supply:

96. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Supply: 10 9 S D S'

97. Factors that cause changes in Supply:  Changes in Technology.  Changes in Resource Price.  Changes in the Prices of Other Goods.  Changes in the Number of Suppliers.

98. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Supply: 10 9 S D S' D'

99. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Supply: 10 9 S D S' D'

100. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Supply: 10 9 S D S' D'

101. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Decrease in Supply: 10 9 S D S' D'

102. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Decrease in Supply: 10 9 S D S' D'

103. Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Decrease in Supply: 10 9 S D S' D'