Introduction Lecture 1

Course Objectives Develop Analytical Thinking Skills Through the development of theoretical economic models and concepts Through reference to statistical information Through the application of these models to real world events in order to understand these events and devise policy solutions To Learn To Think Like An Economist

What do Economists Study? ‘Economic’ variables and behavior -- prices, employment, production, profits, labor supply, consumption and savings ‘Non Economic’ variables behavior -- marriage, fertility, crime, discrimination, health, politics and voting Institutions and Social Norms

What is Economics? “The study of economies, at both the level of the individual and the society as a whole” (K/W page 2) Economies -- “the system of coordinating society’s productive activities” (K/W page 2) –Market economies -- decentralized decision making coordinated through prices –Command Economies -- centralized decision making

What is Economics? Alternative Definitions The study of the effect of scarcity on society The study of how society answers the following questions: –What goods and activities will be produced in society –How will the goods be produced –Who will produce the goods –Who gets to consume the goods

Micro versus Macro Micro -- study of how individuals make decisions and interact with others in society Macro -- study of aggregate behavior of the economy (inflation, unemployment, growth)

Introduction to Microeconomics Introduction implies an ‘overview’ of the issues and methods used by economists to study how individuals make decisions and interact with each other to pursue their self interest. Intermediate Micro Theory -- same issues, more attention to assumptions underlying the analysis Graduate Level Micro Theory -- mostly math

Required Text Microeconomics By Krugman and Wells (Princeton University) Available Online and in Bookstore Be Sure to get “Homework Advantage”

Overall Course Grade 20% First exam (9/19) 20% Second exam (10/12) 20% Third exam (11/9) 30% Final Exam (12/11 -- Monday) 10% Homework

Lectures Attendance is not required but strongly encouraged Prior to each lecture, the PowerPoint slides will be made available on web. However, the slides are just bare bone notes. Multi-colored pens or pencils will be helpful in note taking

Why Study Economics? This Course is Required –Business School and Economic Major –Way to Complete Social Science Requirement –Parents To Understand How the Economy Works –For the Pure Purpose of Gaining Knowledge –Personal Gain –To Better Society

Micro is Fun and Interesting! But will it be hard?

It Can Be Hard But how you study can make a difference !

How to Study Micro Do Reading Assignment (once is not always enough) On Student CD-ROM –Go through Student PowerPoint Slides for Review –Do Student Quiz Download Lecture Slides from Web Attend Lecture Do Graded Homework on ‘Homework Advantage’ Ask questions in class, , office hours Start a Study Group

Available on Web Syllabus PowerPoint Lectures Handouts and Additional Readings Study Guides

Contact Information Office (245 O’Shaughnessy Hall) Office Hours –By Appointment Telephone:

Homework Advantage First Time –Click ‘Register as Student’ button –Provide Access Code from ‘Homework Advantage’ Card –Provide Information (keep record of password and username) After First Time –Login –Complete Assigned Homework Prior to Deadline –Click ‘Grade’ button and Exit

Words of Encouragement “I would add one word for any student beginning economic study who may be discouraged by the severity of the effort which the study, as he will find it exemplified here, seems to require of him. The complicated analyses which economists endeavour to carry through are not mere gymnastic. They are instruments for the bettering of human life. The misery and squalor that surround us, the injurious luxury of some wealthy families, the terrible uncertainty overshadowing many families of the poor -- these are evils too plain to ignore. By the knowledge that our science seeks it is possible they may be restrained. Out of the darkness light! To search for it is the task, to find it perhaps the prize, which the ‘dismal science of Political Economy’ offers to those who face its discipline.”

Arthur C. Pigou ( ) Previous quote written in “Economics of Welfare” Professor at Cambridge Friend of Keynes Pigovian Solution to the problem of externalities

Assignment for Lecture 2 Read Chapter 1 of Krugman/Wells Next Lecture -- Core Principles