1. Welcome to ECON 160 Principles of Microeconomics richard.tontz@csun.edu http://www.csun.edu/~rlt50610/ Aplia Course Key: 5TS6-7CEH-MEVL

2. Econ 160 The Economic System of Competition

3. Review: Definitions Good Good : is anything that an individual wants to have more of, at zero price. Resource: Anything that can be used to produce goods. Scarcity: A good is scarce if the amount desired at zero price is more than the amount available at zero price.

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

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

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

7. 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.

8. 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.

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

10. Ten Principles of Economics Individual decision making How people interact The economy as a whole

11. Individual Decision Making People Face Trade-offs: Choice Opportunity Cost Rational people think at the margins People respond to incentives

12. How People Interact Trade Makes everyone better off The market system organizes production efficiently Markets outcomes can sometimes be improved upon by Government

13. The Economic/Market Form of Competition

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

15. Economic Agents & Decision-making HouseholdsHouseholds: Decisions: What to sell? What to buy? Assume Maximize Utility FirmsFirms: Decisions: What inputs to use? What to produce? Assume Maximize Profits. MarketsMarkets: Factor Markets, Product Markets Role of Money Role of Money: The medium of exchange

16. Definition of Money Currency in Circulation: Currency outside of Banks in the hands of households,or firms Checkable deposits in Banks, Savings & Loans, Credit Unions

17. Assignments Check Aplia for Assignment due Sunday Night Read Chapter 3 Check for new Classnotes & Powerpoints