Introduction to Economics Outline Lecture One Information About the Course What is economics all about Examples Elements of Personal Finance Buying or Leasing a Car Llad Phillips 1 Economics 109 Llad Phillips Introduction to Economics Fall 2002 Hour Location 2 00 3 15 Engineering 1104 Instructor Llad Phillips Llad econ ucsb edu Office Hours NH 3032 9 30 10 15 TuTh and 10 30 11 15 W and by appointment Arthur O Sullivan and Steven Sheffrin Economics Principles and Tools Third Edition 2003 2001 Labs sections 12617 MCL 12625 12633 12641 Note 12658 12666 F 9 00 9 50 AM M 2 00 2 50 PM M 7 00 7 50 PM W 8 00 8 50 AM Th 6 30 7 20 PM F 1 00 1 50 PM Jalama Lab Phelps 1517 Rincon Lab Phelps 1518 Jalama Lab Phelps 1517 Jalama Lab Phelps 1517 Rincon Lab Phelps 1518 Rincon Lab Phelps 1518 Teaching Assistants Dunghun Cho Offi ce NH 2048 Taeil Kang Offi ce NH 2048 Kirk Lesh Offi ce NH 2043 Exams Quiz Tuesday Oct 17 You will need scantron sheet and 2 pencil Midterm Tuesday Nov 5 2 00 3 15 PM You will need scantron sheet and 2 pencil Final Thursday Dec 12 4 00 7 00 PM You will need scantron sheet and 2 pencil Problem Assignments At least half of the questions on the 25 minute quiz will be from the assigned problems both text and lab Due at the next Lab section Standing Assignment Read the business section of the Los Angeles Times Course Home Page http www econ ucsb edu Note menu on the left Class Pages Economics 109 Text Home Page http www prenhall com osullivan Lecture Topics and Reading List Part One Personal Finance Economics in Everday Life 1 Tuesday Sept 25 Lecture One Choosing a method to finance a car Buying or Leasing a car The choice between paying cash leasing buying on time Reading Assignment O Sullivan and Sheffrin Ch 1 Introduction What is Economics emphasis concepts of scarcity and production possibilities curve O Sullivan and Sheffrin Appendix to Ch 1 Using Graphs and Formulas Problems O S Text p 13 1 2 3 4 5 p 21 1 2 3 4 5 6 Lectures Organization of Concepts Llad Phillips 7 Collective Group or Social Behavior Political Social Cultural Economic How to understand and cope with the economic part of life Llad Phillips 8 World Economy Japan Japan European Union Mexico US Economy YOU Llad Phillips Iraq Me 9 World Economy US Economy YOU Llad Phillips Me 10 Topics in Personal Finance What Can We Learn from Econ Buying a Car Buying a House Budgeting Expenses Saving and Investing Money Llad Phillips 11 Concepts and Buying a Car Scarcity Consumer Durable and Depreciation opportunity cost Consumer Choice brand and model how to pay Llad Phillips 12 Llad Phillips 13 Llad Phillips 14 What is Economics All About Llad Phillips 15 Five Topic Areas Personal Finance and the Individual income expenditure wealth or net assets income expenditure statement asset liabilities statement The National Economy Markets Competition versus Monopoly The Global Economy Economic Welfare Llad Phillips 16 Five Topic Areas II The National Economy consumers business firms government III Competition versus Monopoly the Firm Llad Phillips how monopoly shafts the consumer how competition benefits the consumer anti trust policy 17 Five Topic Areas IV The Global Economy Trade Balance of Payments Foreign Exchange Economic Welfare distribution of income poverty aging and health public goods e g safety Llad Phillips 18 Year Before Last Year s 2000 Current Economic Questions Who is better for you Bush or Gore Is the great bull market of the 90 s over Is the economy about to crash Is Japan going to recover Will the government break up Microsoft Llad Phillips 19 Last Year s 2001 Current Economic Questions Are we in a recession How bad could it get How long will it last Will the stock market stabilize What kind of economic impact did the attack have If we continue to mobilize what kind of economic impact will that have Llad Phillips 20 http www odci gov World Factbook 2001 Afghanistan GDP per capita 800 versus US 36 200 Llad Phillips 21 http www odci gov World Factbook 2001 Iraq GDP per capita 2500 versus US 36 200 Llad Phillips 22 Introduction to Economics Elements of Personal Finance Llad Phillips 23 Elements of Personal Finance Economics in every day life buying or leasing a car buying or renting a home personal financial planning managing personal investments managing a household budget determinants of personal income Llad Phillips 24 Buying or Leasing a Car Your choice of vehicle Is it what you need Is it what you want Is it what you can afford Loss of value through depreciation of your car Llad Phillips physical wear and tear decrease in resale value paying a premium for newness 25 The Process of Economic Decision Making Compare alternative choices if you make a choice are you giving anything up a cost to get what you want Which is the best choice Criteria lowest cost or highest benefit net of cost Llad Phillips 26 Economic Concept Consumer Durable e g car refrigerator perishable good strawberries experience with Farmers Markets Haymarket Square in Boston Why did institutional buyers such as convents buy on late Saturday afternoons durable good car resale value declines each year Llad Phillips How does this affect choice of which car to buy 27 Sources of Information Kelley Blue Book Used Car Guide bookstores Kelley Blue Book Internet Universal Resource Locator URL http www kbb com Manufacturers Nissan Llad Phillips http www nissandriven com 28 2003 Nissan Altima Llad Phillips 29 Kelley Blue Book Kelley Blue Book Kelley Blue Book http www nissan usa com Economic Decision Making choice of a vehicle Nissan Altima XE 4 Dr Sedan Ford Taurus 4 Dr Sedan choice of payment method cash lease payment plan Llad Phillips 34 Economists Assume You Know What You Like Lingo economists call these consumer tastes or consumer preferences Llad Phillips 35 Economists Assume You Can make Comparisons example 1996 Altima vs 1996 Ford Taurus compare specifications or attributes we know price for a bundle of attributes e g horsepower miles per gallon etc dealer invoice with destination charge Altima 14 641 Taurus 17 171 manufacturer s suggested retail price MSRP Altima 16 219 Taurus 18 545 Llad Phillips 36 Economists Assume You Can Make Tradeoffs Do you prefer a Ford Taurus or an Altima plus 2 326 18 545 16 219 If you prefer the Ford then you buy the Taurus If you prefer the Nissan plus the cash then you buy the Altima If you are indifferent between these two options or bundles of goods car plus cash then you might buy either one Llad Phillips 37