Lecture 1 Complete.docx

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Department
Economics
Course
ECON104
Professor
Steve Agnew
Semester
Spring

Description
Econ104 Introduction to Microeconomics Lecture 1: Principles of Economics Textbook Chapter 1, pages 3-18 In Class Notes  Utility for satisfaction – maximization of differs between people; different people derive utility (happiness) from different things. This means consumers have different preferences. E.g. World Vision; Sponsoring a Child $40/month vs. Drinking Beer weekly $20/week. Key Economic Principles: (6 main principles covered in course) 1. People face trade-offs; people constantly face trade-offs because of scarcity of resources, income, time etc. 2. The cost of something is what you have to give up to get it; the true cost of any choice includes the opportunity cost, which is defined as the next best alternative foregone when making a decision. Opportunity cost includes the actual cost and the utility expected of the alternative. 3. People respond to incentives; understanding economic incentives is crucial in explaining the behavior of individuals and groups. Sometimes government policy can have perverse or unintended consequences. E.g. Seatbelt legislation; People who wear seatbelts drive faster due to safer feeling, as a result the number of pedestrians and cyclists killed increased. 4. Markets are usually a good way to organize economic activity. 5. Governments can sometimes improve market outcomes; they can also make them worse as well. A politicians’ number one goal is to be re-elected. E.g. 1: Petrol Sticker legislation- Rather than not driving on the day of the week stickered people purchased another car with an alternative sticker. E.g. 2: Communism in Poland and the dictation of toilet paper and meat supply resulting in shortages. 6. The role of information; information is important in the efficient allocation and use of scarce resources. E.g. 1: Ladies of the pen – woman are in jail after further investigation. E.g. 2: Purchasing a car – Asymmetric Information resulting in bad purchasing decisions. Extended Notes  Voluntary trade can make everybody better off; this comes with the assumption that there are no negative effects from trade due to the voluntary nature.  Markets are usually a good way to organize economic activity; government decisions have an ability to cause shortages.  The role of information is important in markets; complete information allows for greater efficiency.  Marginal analysis is import
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