1. Morning Session Homework #1  Chapter 1 Question 1: Tracy Bertagnole Question 2: Anthony Juarez Alternates: Marisela Enciso and Corbyn Ladd MAKE SURE TO PUT YOUR NUMBER NOT YOUR NAME ON YOUR HOMEWORK!! ALSO PUT YOUR NUMBER ON THE PAPER YOU ARE GRADING!!

2. Afternoon Session Homework #1  Chapter 1 Question 1: Clinton Huff Question 2: Lizbeth Medina Alternates: Carly Elder and Sophie Laureano MAKE SURE TO PUT YOUR NUMBER NOT YOUR NAME ON YOUR HOMEWORK!! ALSO PUT YOUR NUMBER ON THE PAPER YOU ARE GRADING!!

3. Chapter 1 What is Economics About

4. Beginning to Think Like an Economist …is this a good thing?

5. Defining Economic Goods  Utility Satisfaction you receive from consuming a product Good vs. Bad  Tangibility Can the good be touched or is it a service?

6. Defining Economic Goods  Resources or factors of production used Land: natural resources Labor: Physical and mental talents of people Capital: produced goods that can be used as inputs for further production Entrepreneurship: talent of organizing resources, seeking new opportunities, and developing new ways of doing things

7. Remember Scarcity Runs the Show…  What was scarcity??  So…how do we make sure that only those who REALLY need the good get it??  Prices System of rationing of the good Cause people to compete for the item

8. Opportunity Cost  Value of the next best alternative foregone  Pizza vs CD Pizza for $1.00 per slice; CD for $15.00  Revolutionary War The British and their red coats

9. Opportunity Cost  Big Macs Big Macs in Japan cost $8.25  Highway System Paid for with taxes

10. Summary Statement of Scarcity and Related Concepts

11. Costs and Benefits at the Margin  What is the margin?? The “last” or “additional”  Marginal Cost The cost of the “last” unit employed  Marginal Benefits The benefit of the “last” unit employed  Unintended effects Minimum wage Gun bounties Seat belts

12. Efficiency  What is the “right amount” of time to study? Right amount = optimal or efficient amount Marginal Costs = Marginal Benefits

13. Economic way of thinking includes…  Analyzing scarcity  Look at opportunity cost of decisions  Measure costs and benefits  Look at marginal effects  Examine unintended effects

14. Economic Thinking Errors  Association vs. Causation You hit red lights because you are running late Don’t study for a test so you fail  Fallacy of Composition What is good for the individual is good for the group  Forgetting Ceteris Paribus All else remains constant

15. What is this?

16. Model  Simplified version of reality Includes only the “important” aspects  Why is a model necessary??

17. Parts of a Theory  Variables Magnitudes that can change  Assumptions Ideas about event that will not allow to change  Hypothesis Educated guess  Predictions Based on hypothesis and assumptions

18. Scientific Approach  What do you want to predict/explain?  What variables are important?  State assumptions  State hypothesis  Test  If results are good…Yeah You!!  If results are bad…amend or reject theory

19. Building and Testing a Theory

20. How do we judge theories?  Look at how well they predict  NOT by the assumptions  Example: Firms try to maximize profits Do they think about this every second? Probably not Over the course of the year…make decisions to maximize profits