Lecture notes – Week 1
Chapter 1 – Microeconomics: A Way of thinking about business (and life!!!) The bottom line
Property rights are crucial to the efficient allocation of resources that are depleted or devalued in some way when used and when transaction costs are low. They can be a problem when transaction costs are high and the use of the resource does not deplete the resource or devalue it.
1)What is economics about?
a) What and how much to produce
b)How to produce it
c)For whom to produce it
Example: 4 ways to use money
What does this show?
2)Public property – tragedy of commons
Does this work?
How? (See attached article)
3)Private property – factors of production/resources scarcity a.Argentina
4)What is a market?
b)Are there other dimensions which we should also consider?
5)What are entrepreneurs?
6)Why does scarcity exist? wants does NOT equal being satisfied a.Frequency
7)Macroeconomics is about what?
a.However some concepts can be used in both Microeconomics and Macroeconomics i.For example taxes
Some Macroeconomics example
a)Although our coverage is concentrated in Microeconomics, why should managers also be educated/exposed to the Macroeconomy?
8)What is comparative advantage?
9)What does comparative advantage lead to?
Intro to the Production Possibility Curve
What does the curve show (It bows out because it shows ↑ marginal opportunity cost.)
a)What is the goal?
Loaves of BreadDozens of CookiesLoaves of BreadDozens of Cookies 4040
Loaves of BreadDozens of Cookies
Loaves of BreadDozens of Cookies
Since Steve has a comparative advantage in making Cookies, then Sara will concentrate in making Bread. Sara should be indifferent with trade since to make one more unit of cookies she only gives up one unit of bread. Steve needs to give up 2 units of cookies to make one more unit of bread.
Hint: exploit the one with the comparative advantage. Since Steve has comparative advantage in cookies, he should make only cookies (8), and Sara should only make bread (4). This bows out the curve.
Doctor versus custodian
a)Economic forces (different schools of thought)
b)Social and historic forces (religion and tradition)
c)Political and Legal forces (democratic versus dictatorship)
10)Should we have free or fair trade? Why?
How should it be analyzed?
12)What are economic models?
13)A big portion to help control individual’s actions is by providing “incentives” a.Credit card and bankruptcy
b.Low to middle income and health insurance qualifications
d.Public school versus private school
i.Read this article: Earnings Wizardly (10/02/12): http://online.wsj.com/article/SB10000872396390444138104578030353195160818.html 1.A) What’s the moral of the story regarding “incentives” f.Socializing your grades???
14)Basic Economic question/ problem is inspiring people to do something they wouldn’t normally do (going back to school), and also limiting something people like to do by harming themselves or others (smoking, polluting, etc.)
a.actions (inactions) taken by government to influence economic actions.
b.Additional examples, welfare (WIC), taxes, military, family (example: China and children), single-parent versus two-parent family.
c.Should the company run a deficit?
d.Should countries run trade deficit?
e.Increase or decrease taxes?
16)Different Types of Economics:...