From the syllabus, you should already know what the discipline of economics entails. How does this song relate to the definition provided in the syllabus?

Defining Economics Clue was in the song.

Defining Economics The social science of decision-making under conditions of scarcity. The study of how people seek to satisfy their endless wants and needs with their limited resources by making choices. Does the Rolling Stones song “You Can’t Always Get What You Want” relate to economics?

The Dismal Science Why is economics called the “dismal science”? Boring professors.

The Dismal Science Why is economics called the “dismal science”? Making decisions isn’t fun. Reminds us that “You can’t always get EVERYTHING” you want. “Economy is art of making the most out of life.” Gary Becker

Macro vs. Micro Big vs. Little Macro--the study of a country’s economy or one sector—all consumers or all producers. AGGREGATE Micro-- the study of one business/consumer or all businesses within a market.

Is it Macro or Micro? What caused the Great Depression? Will consumers buy a t-shirt at Gap for $39.99? Micro Are MP3 downloads killing CDs? Are free services like Pandora and Spotify killing MP3 sales? What is the affect of a tax increase on GDP? What will happen to ticket prices if Southwest and American Airlines merge?

Science of Economics Examples: Positive Economics—what is, positive statements are statements of fact* economist most interested in Normative Economics—what should be, normative statements are statements of opinion Examples: “The number of farms has decreased over the last 50 years.” “The poor pay too much for housing.” “If income decreases the demand for most goods will decrease.”

Examples The unemployment rate is currently at 9 percent. The government must take action in order to reduce the unemployment rate. Resources are best allocated by allowing the market mechanism to work freely. Unemployment is more harmful than inflation. A fall in incomes will lead to a rise in demand for off- brand supermarket foods. Higher interest rates will reduce house prices. The government should increase the minimum wage to $10 per hour to reduce poverty.

Ceteris Paribus a Latin phrase that means all variables other than the ones being studied are assumed to be constant. All other things being equal The demand curve slopes downward because, ceteris paribus, lower prices imply a greater quantity demanded!

1. A key theme fundamental to all of economics is: there are limited wants. we are a rich country but are simply not aware of it. people have unlimited wants and face limited means to satisfy them. there are unlimited resources. income is evenly distributed to all persons in the economy.

1. A key theme fundamental to all of economics is: there are limited wants. we are a rich country but are simply not aware of it. people have unlimited wants and face limited means to satisfy them. there are unlimited resources. income is evenly distributed to all persons in the economy.

2. When we are forced to make choices we are facing the concept of: ceteris paribus. free goods. scarcity. the margin. positive and normative analysis.

2. When we are forced to make choices we are facing the concept of: ceteris paribus. free goods. scarcity. the margin. positive and normative analysis.

3. Which of the following would be a part of macroeconomics? A study of the change in automobile sales due to a change in the price of automobiles. A study of the impact of a tax reduction on the profits of a business. A study of recessions. A study of the unemployment of workers displaced by technological change in the typesetting industry A study of the impact of subsidizing public education.

3. Which of the following would be a part of macroeconomics? A study of the change in automobile sales due to a change in the price of automobiles. A study of the impact of a tax reduction on the profits of a business. A study of recessions. A study of the unemployment of workers displaced by technological change in the typesetting industry A study of the impact of subsidizing public education.

4. Which of the following statements would be a part of macroeconomics? I. The central bank has lowered interest rates to lessen the impact of a recession. II. A severe drought in the American Midwest has reduced the corn harvest and increased corn prices. III. The U.S. Gross Domestic Product has risen sharply, indicating that the recession might be near an end. A. I only B. II only C. III only D. I and II only E. I and III only

4. Which of the following statements would be a part of macroeconomics? I. The central bank has lowered interest rates to lessen the impact of a recession. II. A severe drought in the American Midwest has reduced the corn harvest and increased corn prices. III. The U.S. Gross Domestic Product has risen sharply, indicating that the recession might be near an end. A. I only B. II only C. III only D. I and II only E. I and III only

5. Which of the following statements is a positive statement 5. Which of the following statements is a positive statement? Which is a normative statement? X. The federal minimum wage has increased to $7.25 an hour. Y. The minimum wage should be high enough that families will not live in poverty. Z: A higher minimum wage typically increases the unemployment rate for teenagers. A. X is positive; Y is normative; Z is positive B. X is positive; Y is positive; Z is positive C. X is normative; Y is positive; Z is normative D. X is normative; Y is normative; Z is normative E. X is positive; Y is normative; Z is normative

5. Which of the following statements is a positive statement 5. Which of the following statements is a positive statement? Which is a normative statement? X. The federal minimum wage has increased to $7.25 an hour. Y. The minimum wage should be high enough that families will not live in poverty. Z: A higher minimum wage typically increases the unemployment rate for teenagers. A. X is positive; Y is normative; Z is positive B. X is positive; Y is positive; Z is positive C. X is normative; Y is positive; Z is normative D. X is normative; Y is normative; Z is normative E. X is positive; Y is normative; Z is normative