Microeconomics Please provide the following information on the 3 X 5 card: Name Phone Something you want the class to know about you.

Microeconomics Introductions

Definitions Economics –Is the study of how people make choices.

Definitions Why do we have to make choices? We must choose because our wants are unlimited but our resources are limited.

Limited Resources the factors of production 1. Natural resources (land) 2. Labor or human effort 3. Physical Capital machines used to make other products 4. Human Capital skills and abilities 5. Entrepreneurial Ability

Scarcity Term used to describe limited resources Time can also be scarce, and so can money.

Microeconomics Is the study of how individuals make choices We will study how choices are made by people in their roles as consumers, business leaders, and citizens.

Ceteris paribus Latin for “all things being equal”. In a graph or example, ceteris paribus means that all other variables are fixed.

Market Where buyers and sellers exchange things. Markets are not necessarily physical places anymore. E-bay is a cyber-market.

Invisible Hand Adam Smith in the Wealth of Nations offered the idea that individuals acting in a market to serve their own interest, frequently promote the best interest of society. Frequently, not always, as the recent business scandals show.

Production Possibilities Curves With a given amount of resources we can only produce a limited amount of goods or services. The graph on the board shows the combinations of spaghetti or lasagna dinners served.

Opportunity Cost The value of the choice given up. The 1965 Corvair Monza Story Opportunity Cost and the Production Possibilities Curve

Marginal Always think “extra” when you see the word “marginal” in economics The margin of averages example on the board

Supply and Demand

Selling the Answers to the Test

Demand Demand is the quantity that consumers are willing and able to buy at various prices The law of demand states that as price goes down, the quantity demanded increases.

Supply Supply is the quantity that producers are willing and able to sell at various prices. The law of supply states that as price increases the quantity supplied will increase

6 reasons to draw an new Demand Curve 1. Size of group 2. Tastes of Group 3. Expectations

6 Reasons (cont’d) 4. Income 5. Price of substitute good 6. Price of complementary good

4 reasons to draw a new Supply Curve 1. Number of producers 2. Expectations 3. Technology 4. Costs of factors of production