2. Econ 110 Principles of Microeconomics Welcome!

3. “Economics is common sense made difficult” –As seen by an undergraduate student

4. Dr. Anwar Al-Shriaan Economics Department Office hours: Sundays and Tuesdays 12:00– 12:50 pm and by appt.

5. Today Syllabus Intro to economics

6. What will we be studying? Eco 110 is the first economic theory course basic foundation of economics tools of discipline

8. Look at buyer and seller behaviour (markets) role of government in markets consumer choice producer behaviour determinants of income and poverty

9. Why have energy prices risen (fallen)?

10. Why does price control not work?

11. Is Microsoft a monopoly? Why do we care?

12. Is college worth the cost?

13. What causes the gender wage gap?

14. Why do airlines require a Saturday night stay for a low fare?

15. Course Materials Required: McConnell and Brue“ Economics“, 16th ed

16. Recommended course web site URL at top of the syllabus contains –course information –exam study guides –TA’s

17. lecture notes PowerPoint slides

18. Email list I send email about –Announcements –Course information Do you prefer Emails or Facebook groups.

19. TA Check my website But please see me too!

20. Grading Policy Midterm 1 30% Midterm 2 30% Recitation and Participations 10% Final 30%

21. Grading Policy Letter grades will be assigned as follows: 94.00 – 100.0 % … A 90.00 – 93.99 % … A- 86.00 – 89.99 % … B+ 83.00 – 85.99 % … B 80.00 – 82.99 % … B- 78.00 – 79.99 % … C+ 73.00 – 77.99 % … C 70.00 – 72.99 % … C- 66.00 – 69.99 % … D+ 60.00 – 65.99 % … D 59.99 – 0.00 % … F

22. Grading Policy Your Final Grades: 1 st Mid + 2 nd Mid + Part + Final. If Your Participation > 8.5 you will have Extra credits as follows: Your Final Grades: 20% X Max (1 st Mid, 2 nd Mid, Final)

23. Grading Policy Your Final Grades: 1 st Mid + 2 nd Mid + TA + Part + Final. If Your Participation > 8.5 you will have Extra credits as follows: Your Final Grades: 20% X Max (1 st Mid, 2 nd Mid, Final) 1 st Mid (25) 2 nd Mid (25) Part (10) Final (40) Total 222492882B- 84%88%70% 86 B+

24. 1 st Mid (25) 2 nd Mid (25) Part (10) Final (40) Total 151793677C 60%68%90% 82.4 B-

25. 1 st Mid (25) 2 nd Mid (25) Part (10) Final (40) Total 151764076C 68%100%76 151794080B- 86B+

26. final exam cumulative

27. Makeup's Usually I don’t do it planned absence: 1 week’s notice emergencies: case-by-case must be an excused absence! must be documented! makeup's may be essay exams or I may re weight other exams

28. Attendance regular attendance is expected you are responsible for information in class attendance is necessary to earn extra credit.

29. Please be respectful of your classmates be on time do not talk during lecture do not have your phone on

30. Cheating you cheat, I catch you, you fail the course programmable calculators (e.g. TI- 83),translators, phones, PDAs, etc. are NOT allowed in exams

31. Course Schedule in syllabus note exam dates, note the final exam date & time

32. Tips for success come to class with lecture notes to follow read the book!! weekly “look-through” ask for help ME or the TA or ME use available resources –course web site

33. Why you should try to learn something in this course. Percentage of wage dispersion explained by skill factors. Huge variation in earnings of low vs. high-skilled college graduates

34. if you need special accommodations, see me if you are having problems in the course, see me sooner NOT later

35. Some definitions of economics

36. “Economics is a study of mankind in the ordinary business of life” Alfred Marshall

37. "the purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists." Joan Robinson

38. “Economics is what economists do” Jacob Viner

39. Economics (1) Study of the choices people make to attain their goals given their scarce resources.

40. Economics: Foundations and Models 1.What do economists study? gasoline prices, inflation, housing markets, international trade, income inequality, sports, families, smoking, health care, happiness decision-making or choices 2.How do they do it? by using theories and models theories are based on assumptions

41. What makes a good theory or a model? Models are not judged by their realism but by their usefulness What is the most useless map in the world? To be useful a model has to be refutable

42. Why study theory? “I don’t know how it is in theory but here is what I know from my 20 years of experience will happen “ Laura, Executive MBA student Theory saves time!

43. When Economists Disagree: A Debate over Outsourcing Making the Connection Learning Objective 1.3 Does outsourcing by U.S. firms raise or lower incomes in the United States?

44. Economics (2) Study of the choices people make to attain their goals given their scarce resources.

45. Economics When the price is zero there is not enough for everyone People behave as if they are comparing the costs and benefits Scarcity Choices Benefits Costs Unlimite d wants Limited availabilit y

46. Economics Everything has alternative uses Scarcity Tradeoffs Opportunity cost

47. Economics People are rational when they behave as if they were comparing costs and benefits Choices People respond to incentives Decisions are made on the margin

48. as if “…getting out of bed in the morning and making breakfast involves more complex decisions than the average game of chess. (Will that fries egg kill me in twenty-eight years?)” Charles Wheelan

49. Economics (3) Study of the choices people make to attain their goals given their scarce resources.

50. Trade-offs force society to make choices, particularly when answering the following three fundamental questions: 1What goods and services will be produced? 2How will the goods and services be produced? 3Who will receive the goods and services produced? The Economic Problem That Every Society Must Solve

51. Centrally planned economy An economy in which the government decides how economic resources will be allocated. The Economic Problem That Every Society Must Solve Market economy An economy in which the decisions of households and firms interacting in markets allocate economic resources. Centrally Planned Economies versus Market Economies

52. Mixed economy An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources. The Economic Problem That Every Society Must Solve The Modern “Mixed” Economy

53. Positive analysis Analysis concerned with what is. Economic Models Normative and Positive Analysis Normative analysis Analysis concerned with what ought to be. Don’t Let This Happen to YOU! Don’t Confuse Positive Analysis with Normative Analysis

54. The Market System and the Circular Flow 2 C H A P T E R

55. PROPERTY RESOURCES 1. LAND 2. CAPITAL HUMAN RESOURCES 3. LABOR 4. ENTREPRENEURIAL ABILITY SCARCE RESOURCES ECONOMIC RESOURCES

56. Resource payments: correspond to resource categories RENTALINCOME INTERESTINCOME WAGES PROFIT & LOSS PROPERTY RESOURCES LAND CAPITAL HUMAN RESOURCES LABOR ENTREPRENEUR

57. Macroeconomics Starts Here

58. Economic Systems Definition: A particular set of institutional arrangements and a coordinating mechanism to respond to the economizing problem. Economic systems differ as to: 1) who owns the factors of production 2) the method used to motivate, coordinate, and direct economic activity.

59. The Command System The government owns most property resources and economic decision making occur through a central economic plan. The central planning board determines production goals for each firm and resources to be allocated.

60. The Market System There is private ownership of resources. Markets and prices coordinate and direct economic activity. Each participant acts in its own self-interest. In pure capitalism the government plays a very limited role.

61. Characteristics of the Market System Private Property. Freedom of firms to choose. Self interest. Competition. Markets and prices. Technology and capital goods. Specialization. Use of money. Active, but limited government.

62. The Circular Flow Model There are two groups of decision makers in the private economy: households (resource owners) and businesses (resource users)There are two groups of decision makers in the private economy: households (resource owners) and businesses (resource users) The market system (resource markets and product markets) coordinates these decisions.The market system (resource markets and product markets) coordinates these decisions.

63. What happens in the resource markets? a.Households sell resources directly or indirectly (through ownership of corporations) to businesses. a.Households sell resources directly or indirectly (through ownership of corporations) to businesses. b. Businesses buy resources in order to produce goods and services. c.Interaction of these sellers and buyers determines the price of each resource, which in turn provides income for the owner of that resource. d.Flow of payments from businesses for the resources constitutes business costs and resource owners’ incomes.

64. What happens in the product markets? a. Households are on the buying side of these markets, purchasing goods and services. b.Businesses are on the selling side of these markets, offering products for sale. c.Interaction of these buyers and sellers determines the price of each product. d.Flow of consumer expenditures constitutes sales receipts for businesses.

65. CIRCULAR FLOW MODEL BUSINESSES HOUSEHOLDS RESOURCE MARKET PRODUCT MARKET

66. BUSINESSES HOUSEHOLDS RESOURCE MARKET RESOURCESINPUTS PRODUCT MARKET CIRCULAR FLOW MODEL

67. BUSINESSES HOUSEHOLDS RESOURCE MARKET RESOURCESINPUTS $ COSTS$ INCOMES GOODS & SERVICES SERVICES PRODUCT MARKET CIRCULAR FLOW MODEL

68. BUSINESSES HOUSEHOLDS RESOURCE MARKET RESOURCESINPUTS $ COSTS$ INCOMES PRODUCT MARKET GOODS & SERVICES GOODS & SERVICES CIRCULAR FLOW MODEL

69. BUSINESSES HOUSEHOLDS RESOURCE MARKET RESOURCESINPUTS $ COSTS$ INCOMES PRODUCT MARKET GOODS & SERVICES GOODS & SERVICES $ CONSUMPTION$ REVENUE CIRCULAR FLOW MODEL

70. BUSINESSES HOUSEHOLDS RESOURCE MARKET RESOURCESINPUTS $ COSTS$ INCOMES PRODUCT MARKET GOODS & SERVICES GOODS & SERVICES $ CONSUMPTION$ REVENUE

71. More Realistic Circular Flow

72. Macroeconomic Policies

73. Limitations of the model: 1. Does not depict transactions between households and between businesses (inter- businesses). 2.Ignores government and the “rest of the world” in the decision-making process (we will take care of them later on). 3.Does not explain how prices of products and resources are actually determined.