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: Crashers90 students max, due to the nature of this classNo additional room in this classInteractive parts to the classClass size should be 50-80 students for these interactive componentsFirst issue: CrashersCrash listMust be sophomore status or upTo be eligible to add this class, you must do all of the following this weekShow up to each lectureShow up to any section you are able to addProvide proof of sophomore status or higher to meFailure to do any of the above will make you ineligible to add this classI may not be able to add all “eligible” crashersFirst issue: CrashersNo add codes distributed until next weekLast year, only 6 students addedEnrolled students get priority for seatingOther options for Econ 1Prof. Crouch is teaching another lecture of Econ 1 this quarterProf. Sonstelie is scheduled to teach Econ 1 in the spring, with 420 spaces availableEcon 1, and 2 are scheduled to be taught in the summerSecond issue: Note takingMy suggestion is for you to write notes minimallyLecture slides will be available on class websiteThird issue: How this class will workRemember that this is a small class  Ask questions if things are not clearThe syllabus is posted online  See http://econ.ucsb.edu/~hartman/Attendance is an important part of this class, both directly and indirectlyIf reading this size font is difficult, I urge you to sit near the frontWho is this?Who is this?Ben BernankeChair of the Board of Governors of the Federal Reserve SystemCo-author of your Econ 1 textbookTextbook for this classFrank/Bernanke (“F/B”)Principles of MicroeconomicsBrief Edition“Brief” saves you $$$Good substitutes: 2nd, 3rd, or 4th edition, or Principles of Economics by F/BPublished by McGraw-Hill/IrwinOptional study guideExpected to be available in mid-JanuaryCheck regularly with bookstore for more informationOffice hours and review sessionsOffice: NH 2028Office hoursMondays 12:30-1:30 pmWednesdays 2:15-3:15 pmNo formal review sessionsSome time will be spent in lectures and sectionsSome important datesThree 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 changeCheck syllabus for information on allowable calculatorsGradingIf you do not miss a test:Two best tests count 40% eachLowest test counts 20%Exception: If your best test is the final, the final will count 60% and the other two tests count 20% eachIf you do miss a test, check the syllabus for detailsGradingSince this is a small class, there is no pre-set curveHowever, the top students will be guaranteed the highest grades (see syllabus for more details)Extra creditWe will do various activities throughout the quarter, many interactiveAttendance and performance in these activities will give you extra creditYou will also get extra credit (one time) for class participation in lecture (excluding today)Asking an intelligent questionParticipating in an activity that includes a subset of the classExtra creditThe student with the most extra credit points at the end of the quarter will receive a 5 percentage point boost to gradeOthers will receive less than 5 percentage points, formula to be determined at the end of the quarterToday: An introduction to economicsWhat is economics?Money?Finance?Today: An introduction to economicsWhat is economics?Money?Finance?Part of the study of economics involves money and financeAs we will see over the next 10 weeks, economics covers many topicsAn introduction to economicsWhat 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 economicsScarcityCost-benefit analysisIncentives matterComparative advantageIncreasing opportunity costEquilibriumEfficiencyScarcityNobody has everything that he/she wantsTo get more of something good, something else must be given upMost people seem to have most things that are “highly valued”Good thingWe will establish what “highly valued” meansCost-benefit analysisCost-benefit analysis: Think marginalCriterion for doing somethingMarginal benefit should be at least as great as marginal costIncentives matterCost-benefit analysis is important in predicting individual behaviorMicroeconomics focuses on individual behaviorFor macroeconomics topics: Wait until Econ 2Comparative advantageIn simple economies: Everyone does best with specialization and tradeIn more complex economies: ON AVERAGE, everyone does best with specialization and tradeExample: When trade opens up, one person may have to change jobs and earn less; 100K people pay $1 less on the goodIncreasing opportunity costUse resources with the lowest opportunity cost firstAs with cost-benefit analysis, remember to think in terms of marginalEquilibriumTwo types for this classMarket equilibriumNash equilibrium (game theory)No unexploited opportunities for individuals in either type of equilibriumEfficiencyThe more efficient an economy is, the more consumption can occurIf an economy improves efficiency, each person’s consumption can increaseCaution: Equilibrium and efficient sometimes are the same; sometimes they are notSummaryCrashers: Keep showing up until I have more informationThree tests and extra credit determine your grade7 core principles will be the focus of Econ 1For