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Economics 101: Principles of Economics

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'Economics is the study of mankind in the ordinary business of life. ... Economics takes a systematic approach to analysis ... of Theory in Economics ... – PowerPoint PPT presentation

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Title: Economics 101: Principles of Economics


1
Economics 101 Principles of Economics
  • 0. Welcome!
  • 1. Go over web page ? Economics 101 link
  • Take attendance and go over attendance policy
  • Waiting list web registration
  • Powerpoint slides not a substitute
  • 2. Go over syllabus.
  • 3. Hand out PS 1. Due next Friday, in class.
  • 4. Print out and bring Student Information Sheet
    to class
  • 5. Set up TA session time place
  • 6. For next time, read Ch. 1 Ch. 2
  • 7. Begin first lecture

2
Thought Experiments
  • Why do todays grocery shoppers demand larger
    shopping carts than their parents did 30 years
    ago?
  • Why do 2-earner families generally save less than
    one-earner families with the same total income?
  • Why has income inequality increased dramatically
    over the past quarter-century?
  • Why do those earning the minimum wage not switch
    jobs more often?
  • Why is popcorn so expensive at the movies?

3
What is Economics?
  • Economics is the study of mankind in the
    ordinary business of life. -- Alfred Marshall
    (1890)
  • Social science because it is concerned with
    inter-relationships among individuals groups
    within society
  • Recent articles in economic journals have been
    about welfare dependency, voting patterns, the
    value of life, etc.
  • What makes economics unique?
  • How it studies society rather than what it
    studies
  • Economics takes a systematic approach to analysis
    of human behavior
  • The Economic Problem has 3 parts
  • 1. Objectives
  • 2. Alternatives
  • 3. Constraints

4
What is Economics?
  • The study of how best to allocate resources that
    are scarce.
  • Macroeconomics deals with aggregates -- GNP,
    inflation, exports, imports, government/public
    expenditures, etc.
  • Microeconomics deals with behavior of "small"
    units -- consumers, workers, firms, one industry,
    etc.
  • The Economic Problem for our 3 segments of
    society
  • Individual, Firm, Government

5
Who are the Key Players?
  • Individuals what is their role?
  • Consumers purchase final goods and services
  • Individuals supply 3 main factors of production
  • 1. Labor all kinds of skills and occupations
    (entrepreneurs)
  • 2. Land land and its derivatives are owned by
    individuals
  • 3. Capital individuals supply the funds, via
    their savings, enabling firms to buy plant
    equipment
  • Firms/Companies what is their role?
  • Producers make the final goods and services
    indiv. consume
  • 4. They combine the 3 factors of production with
    a 4th factor of production called material inputs
    (semi-finished products)
  • Government what is its role?
  • Both consumer and producer of goods services
  • Consumption buys inputs for our national
    defense system
  • Production education, utilities, post office,
    highways, etc.
  • Redistribution -- such as?

6
Do Rats have downward-sloping Demand curves?
  • Study at Texas AM
  • 2 goods root beer Tom Collins mix
  • Price times push button
  • Income X pushes / day allowed (300)
  • Equal prices ? mostly root beer
  • Double Prb, halve PTC ? CTC up 4 times Crb was
    lower, in line w/ theory
  • Rats may not have ICs, but their behavior
    can be explained, in part, using them.
  • Hawks/Bees exhibit economic approaches to
    foraging
  • The Nature Role of Theory in Economics
  • Calorie Theory more calories you eat, more
    weight you gain.
  • ceteris paribus
  • While firms may not appear to maximize profit
    always, the theory is still useful for explaining
    predicting firms behavior.
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