Econ 202 1st Edition Lecture 1 Outline of Last Lecture I Office Hours II Syllabus and class expectation Outline of Current Lecture I Intro to Econ A Definition of economics II The 10 Principles of Economics Current Lecture I Intro to Econ a Economics the study of how people make choices under conditions of scarcity and of the results of those choices i Scarcity limited resources b Questions that economist discuss i How do we allocate our scarce resources ii All economies have government involved in markets but to what extend should the government be involved c The difference between microeconomics and macroeconomics i Microeconomics focuses on individuals and individual markets 1 Individuals decision making ii Macroeconomics focuses on the whole economy 1 Economy wide characteristics like a Unemployment rate b Inflation c Economy growth II The 10 Principles of Economics focus on the first 7 Principles 1 4 represent how people make decisions Principles 5 7 represents how people interact a Principle 1 people face trade offs i When you do something you give up something else b Principle 2 the cost of something is what you give up to get it i Opportunity cost the cost of what you give up to get that item thing 1 Ex college tuition books lost time in the work place wages 2 Ex 2 farming in steamboat sell land for 5 million and earned 2 each year 100 000 per year lose land but earn 2 yearly c Principle 3 Rational people think at the margin i Ex for lunch you want pizza Slices Cost 1 The difference between the 1 and 2 slices is 2 how much of a difference 1 2 does it make to you 2 4 2 Marginal cost MC the extra incremental cost of doing something 3 Marginal Benefit the extra incremental benefit you get 4 Rationality if marginal benefit is higher or equal to the MC then you do it and are considered rational ii Ex 2 Buying a vehicle front wheel cost 20 000 vs all wheel 25 000 1 MC 5 000 2 You will buy if the marginal benefit is 5 000 d Principle 4 People respond to incentives i If marginal cost or benefit change people might change their decision 1 Ex Sunday morning in mountain can snowboard for 2hrs for 120 or 0 with season pass MC 120 2 Ex 2 Buy 1 get one 50 off and the pants cost 75 3 Decisions might change based on MC e Principle 5 trade can make everyone better off with trade everyone is better off These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute