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Morning Session Homework #1

Morning Session Homework #1. Chapter 1 Question 1: Tracy Bertagnole Question 2: Anthony Juarez Alternates: Marisela Enciso and Corbyn Ladd. MAKE SURE TO PUT YOUR NUMBER NOT YOUR NAME ON YOUR HOMEWORK!! ALSO PUT YOUR NUMBER ON THE PAPER YOU ARE GRADING!!. Afternoon Session Homework #1.

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Morning Session Homework #1

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  1. Morning SessionHomework #1 • Chapter 1 • Question 1: Tracy Bertagnole • Question 2: Anthony Juarez • Alternates: Marisela Enciso and Corbyn Ladd MAKE SURE TO PUT YOUR NUMBER NOT YOUR NAME ON YOUR HOMEWORK!! ALSO PUT YOUR NUMBER ON THE PAPER YOU ARE GRADING!!

  2. Afternoon SessionHomework #1 • Chapter 1 • Question 1: Clinton Huff • Question 2: Lizbeth Medina • Alternates: Carly Elder and Sophie Laureano MAKE SURE TO PUT YOUR NUMBER NOT YOUR NAME ON YOUR HOMEWORK!! ALSO PUT YOUR NUMBER ON THE PAPER YOU ARE GRADING!!

  3. Chapter 1 What is Economics About

  4. Beginning to Think Like an Economist …is this a good thing?

  5. Defining Economic Goods • Utility • Satisfaction you receive from consuming a product • Good vs. Bad • Tangibility • Can the good be touched or is it a service?

  6. Defining Economic Goods • Resources or factors of production used • Land: natural resources • Labor: Physical and mental talents of people • Capital: produced goods that can be used as inputs for further production • Entrepreneurship: talent of organizing resources, seeking new opportunities, and developing new ways of doing things

  7. Remember Scarcity Runs the Show… • What was scarcity?? • So…how do we make sure that only those who REALLY need the good get it?? • Prices • System of rationing of the good • Cause people to compete for the item

  8. Opportunity Cost • Value of the next best alternative foregone • Pizza vs CD • Pizza for $1.00 per slice; CD for $15.00 • Revolutionary War • The British and their red coats

  9. Opportunity Cost • Big Macs • Big Macs in Japan cost $8.25 • Highway System • Paid for with taxes

  10. Summary Statement of Scarcity and Related Concepts

  11. Costs and Benefits at the Margin • What is the margin?? • The “last” or “additional” • Marginal Cost • The cost of the “last” unit employed • Marginal Benefits • The benefit of the “last” unit employed • Unintended effects • Minimum wage • Gun bounties • Seat belts

  12. Efficiency • What is the “right amount” of time to study? • Right amount = optimal or efficient amount • Marginal Costs = Marginal Benefits

  13. Economic way of thinking includes… • Analyzing scarcity • Look at opportunity cost of decisions • Measure costs and benefits • Look at marginal effects • Examine unintended effects

  14. Economic Thinking Errors • Association vs. Causation • You hit red lights because you are running late • Don’t study for a test so you fail • Fallacy of Composition • What is good for the individual is good for the group • Forgetting Ceteris Paribus • All else remains constant

  15. What is this?

  16. Model • Simplified version of reality • Includes only the “important” aspects • Why is a model necessary??

  17. Parts of a Theory • Variables • Magnitudes that can change • Assumptions • Ideas about event that will not allow to change • Hypothesis • Educated guess • Predictions • Based on hypothesis and assumptions

  18. Scientific Approach • What do you want to predict/explain? • What variables are important? • State assumptions • State hypothesis • Test • If results are good…Yeah You!! • If results are bad…amend or reject theory

  19. Building and Testing a Theory

  20. How do we judge theories? • Look at how well they predict • NOT by the assumptions • Example: Firms try to maximize profits • Do they think about this every second? • Probably not • Over the course of the year…make decisions to maximize profits

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