Welcome to Econ 1, Winter 2009First issue: CrashersSlide 3Slide 4Other options for Econ 1Second issue: Note takingThird issue: How this class will workWho is this?Slide 9Textbook for this classOptional study guideOffice hours and review sessionsSome important datesGradingSlide 15Extra creditSlide 17Today: An introduction to economicsSlide 19An introduction to economicsWhy do we make the choices that we do?ScarcityCost-benefit analysisIncentives matterComparative advantageIncreasing opportunity costEquilibriumEfficiencySummaryFor WednesdayIn the future…See you on WednesdayWelcome to Econ 1, Winter 2009Instructor: John HartmanTeaching Assistant: Rosemarie LavatyFirst issue: Crashers90 students max, due to the nature of this classNo additional room in this classInteractive parts to the classClass size should be 50-80 students for these interactive componentsFirst issue: CrashersCrash listMust be sophomore status or upTo be eligible to add this class, you must do all of the following this weekShow up to each lectureShow up to any section you are able to addProvide proof of sophomore status or higher to meFailure to do any of the above will make you ineligible to add this classI may not be able to add all “eligible” crashersFirst issue: CrashersNo add codes distributed until next weekLast year, only 6 students addedEnrolled students get priority for seatingOther options for Econ 1Prof. Crouch is teaching another lecture of Econ 1 this quarterProf. Sonstelie is scheduled to teach Econ 1 in the spring, with 420 spaces availableEcon 1, and 2 are scheduled to be taught in the summerSecond issue: Note takingMy suggestion is for you to write notes minimallyLecture slides will be available on class websiteThird issue: How this class will workRemember that this is a small class Ask questions if things are not clearThe syllabus is posted online See http://econ.ucsb.edu/~hartman/Attendance is an important part of this class, both directly and indirectlyIf reading this size font is difficult, I urge you to sit near the frontWho is this?Who is this?Ben BernankeChair of the Board of Governors of the Federal Reserve SystemCo-author of your Econ 1 textbookTextbook for this classFrank/Bernanke (“F/B”)Principles of MicroeconomicsBrief Edition“Brief” saves you $$$Good substitutes: 2nd, 3rd, or 4th edition, or Principles of Economics by F/BPublished by McGraw-Hill/IrwinOptional study guideExpected to be available in mid-JanuaryCheck regularly with bookstore for more informationOffice hours and review sessionsOffice: NH 2028Office hoursMondays 12:30-1:30 pmWednesdays 2:15-3:15 pmNo formal review sessionsSome time will be spent in lectures and sectionsSome important datesThree tests, scheduled for:Monday, Feb. 9 (in lecture)Monday, March 2 (in lecture)Tues., March 17 (final, 8:45-10:45 am, room(s) to be announced)Test dates will likely not changeCheck syllabus for information on allowable calculatorsGradingIf you do not miss a test:Two best tests count 40% eachLowest test counts 20%Exception: If your best test is the final, the final will count 60% and the other two tests count 20% eachIf you do miss a test, check the syllabus for detailsGradingSince this is a small class, there is no pre-set curveHowever, the top students will be guaranteed the highest grades (see syllabus for more details)Extra creditWe will do various activities throughout the quarter, many interactiveAttendance and performance in these activities will give you extra creditYou will also get extra credit (one time) for class participation in lecture (excluding today)Asking an intelligent questionParticipating in an activity that includes a subset of the classExtra creditThe student with the most extra credit points at the end of the quarter will receive a 5 percentage point boost to gradeOthers will receive less than 5 percentage points, formula to be determined at the end of the quarterToday: An introduction to economicsWhat is economics?Money?Finance?Today: An introduction to economicsWhat is economics?Money?Finance?Part of the study of economics involves money and financeAs we will see over the next 10 weeks, economics covers many topicsAn introduction to economicsWhat is economics?Frank and Bernanke (FB) define economics as “the study of how people make choices under conditions of scarcity and of the results of those choices for society” (p. 4)Key word to remember: “choice”Why do we make the choices that we do?7 core principles of economicsScarcityCost-benefit analysisIncentives matterComparative advantageIncreasing opportunity costEquilibriumEfficiencyScarcityNobody has everything that he/she wantsTo get more of something good, something else must be given upMost people seem to have most things that are “highly valued”Good thingWe will establish what “highly valued” meansCost-benefit analysisCost-benefit analysis: Think marginalCriterion for doing somethingMarginal benefit should be at least as great as marginal costIncentives matterCost-benefit analysis is important in predicting individual behaviorMicroeconomics focuses on individual behaviorFor macroeconomics topics: Wait until Econ 2Comparative advantageIn simple economies: Everyone does best with specialization and tradeIn more complex economies: ON AVERAGE, everyone does best with specialization and tradeExample: When trade opens up, one person may have to change jobs and earn less; 100K people pay $1 less on the goodIncreasing opportunity costUse resources with the lowest opportunity cost firstAs with cost-benefit analysis, remember to think in terms of marginalEquilibriumTwo types for this classMarket equilibriumNash equilibrium (game theory)No unexploited opportunities for individuals in either type of equilibriumEfficiencyThe more efficient an economy is, the more consumption can occurIf an economy improves efficiency, each person’s consumption can increaseCaution: Equilibrium and efficient sometimes are the same; sometimes they are notSummaryCrashers: Keep showing up until I have more informationThree tests and extra credit determine your grade7 core principles will be the focus of Econ 1For
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