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ECON 101 Chapter 1

by: Megan Lester

ECON 101 Chapter 1 Econ 101

Megan Lester
GPA 2.8

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Chapter 1 notes
Fr. Timmons
Class Notes
Economics, Microeconomic
25 ?




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This 4 page Class Notes was uploaded by Megan Lester on Wednesday September 28, 2016. The Class Notes belongs to Econ 101 at Washington State University taught by Fr. Timmons in Spring 2015. Since its upload, it has received 6 views.


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Date Created: 09/28/16
Chapter 1/Introduction 1/13 - 1/15 Tuesday, January 13, 11:19 AM Introduction and Ch. 1: What is Economics? EconS 101: Fundamentals of Microeconomics Washington State University • Agenda for today ○ Syllabus (Blackboard) ○ Register: LaunchPad, NetTutor, Clickers ○ What is economics? ○ Why study economics?1/12/2015 • Greetings! ○ Welcome to EconS 101 – Principles of Microeconomics. ○ What will you learn? ○ To analyze and think as an Economist. ○ To take information and use an economic model to predict future economic events. ○ To frame policy as an economist would. • Logistics ○ Blackboard: ○ LaunchPad: □ merce/Unauthenticated#/index ○ NetTutor: ○ Clicker registration: • Economics ○ The social science that studies the production, distribution, and consumption of goods and services (book definition). ○ The study of choices made under scarcity. ○ Video • Why study Economics? Why study Economics? • Chapter 1 Outline ○ What do economists do? ○ What are we doing in this course? ○ Positive vs. Normative economics ○ Chapter 1 – what really matters. ○ What is Economics? What do we do? ○ What best matches the class consensus: • What we are doing in this course ○ Microeconomics: ○ How economic agents pursue their own (self ) interests to make decisions and how these decisions affect society. We seek to answer the What?, How?, and Who? questions. ○ • Normative and Positive Analysis ○ In economic analysis, questions of efficiency and equity rely on the use of economic models. ○ We distinguish between Normative and Positive analysis. ○ Normative Analysis Concerned with what ought to be.  ○ Positive Analysis  Concerned with what is. ○ Economics should be about positive analysis, which measures the costs and benefits of different courses of action. Positive analysis shows the consequences of a particular policy. Whether to do it or not is normative ○ analysis. • Example of Normative and Positive analysis Federal minimum wage law: ○ Federal minimum wage law:  Without the law, some firms and workers could agree to a lower wage.  With the law, some workers have difficulty finding jobs, and firms pay more for labor. ○ Normative Analysis would consider if the law is a good idea or bad idea and depends on how people evaluate the trade-off involved. ○ Positive Analysis uses an economic model to estimate how many workers have lost their jobs because of the law, its impact on the costs and profits of businesses, and the gains to workers receiving the minimum wage. • Chapter 1 deals with ○ Core principles of Choice. ○ Trade principles of Choice. ○ Macro principles of Choice. ○ Helps to answer the question: “Why does this matter?” • Principles that underlie Individual Choice ○ Core principles: 1. Resources are scarce. (a) 2. The Opportunity Cost of something is its true cost. (b) 3. We use cost-benefit analysis to make decisions (“How much?”) at the margin. (c) 4. We respond to incentives to make ourselves better off. (d) ○ Which of the 4 core principles apply to what you are doing here right now? ○ Trade (Interaction) principals: 5. Individuals trade because there are gains from trade. 6. Markets move towards equilibrium to exploit gains from trade. 7. To achieve society’s goals, resources should be used efficiently. □ What is society’s goal? Efficiency vs. Equity. 8. Markets usually lead to efficiency. 9. When markets don’t achieve efficiency, government intervention can improve society’s welfare. 1) Which of these principles justify the availability of handicapped parking spots? 2) How would you allocate the scarce resource (parking places)? ○ Macro principles: 10. One person’s spending is another person’s income. 11. Overall spending sometimes gets out of line with the economy’s productive capacity. 12. Government policies can change spending. What side of the debate are you? • End of the week ○ Short Quiz on Chapter 2 Appendix – Graphs in Economics ○ You may bring a small (note card sized) cheat sheet. Bring a calculator. ○ Bring a calculator. ○ Video is posted. ○ Focus will be on drawing a graph; calculating the slope of a line; positive vs. negative relationships; dependent and independent variables.


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