Intro to Microeconomics Notes
What is Economics?
Economics is the study of choices
Choices must be made because resources are scarce
Make a list of all the stuff you like to acquire assuming unlimited income
Dr. S
Home on ICWW
Tons of boats
F-350, Club Cab
Season tickets to NYY, NJ Nets, NY Giants
Condo in NYC
Tickets to Cup Races
Mobile Home
Triumph TR-6
Toyota Landcruiser
Realistic income
Home near ICWW
A boat
Occasional tickets
Toyota 4 Runner
Choices mean we make trade-offs
Opportunity Cost
Informal definition: What you give up when you make a choice
Formal: The value of the next-best, but unchosen alternative
Opportunity Cost Example:
Job choice:
Suppose after graduation you have 2 job options
A. IBM in RTP. Salary= $70,000
B. Own consulting firm in Wilm. Salary= $30,000
Suppose you choose option B, what is the opportunity cost of this decision?
Answer: $70,000 + full value of benefits (living in Triangle area, etc.)
Opportunity Cost Example:
Jeopardy 5x champ
Pick a car!
A. Audi TT conv
B. BMW 5 series
C. Mercedes CLK
D. Caddy Escalade (base)
E. Lincoln Navigator
Suppose you choose the Audi, what is the opportunity cost of this decision?
Whichever car would have been your second pick
“There is no such thing as a “free lunch”?
There is an opportunity cost associated with consuming the lunch you didn’t pay for. (give up your time,etc.)
Microeconomics vs Macroeconomics
Microeconomics- Study of small decision making units
Macroeconomics- Study of large decision making units
Types of economics
Health economics, sports, national resources, labor, economic history, money, trade, etc.
What do economists do?
Economists engage in “positive analysis”
Objective use of facts, theory, data, and models (math and stats) to make conclusions about what is or what might happen if…
Objective- Unbiased, lacking personal opinion
Might involve professional opinion
Contrast this idea with “normative analysis”
Opinion-based statements or questions
Economics is the study of choices
Choices must be made because resources are scarce
Make a list of all the stuff you like to acquire assuming unlimited income
Dr. S
Home on ICWW
Tons of boats
F-350, Club Cab
Season tickets to NYY, NJ Nets, NY Giants
Condo in NYC
Tickets to Cup Races
Mobile Home
Triumph TR-6
Toyota Landcruiser
Realistic income
Home near ICWW
A boat
Occasional tickets
Toyota 4 Runner
Choices mean we make trade-offs
Opportunity Cost
Informal definition: What you give up when you make a choice
Formal: The value of the next-best, but unchosen alternative
Opportunity Cost Example:
Job choice:
Suppose after graduation you have 2 job options
A. IBM in RTP. Salary= $70,000
B. Own consulting firm in Wilm. Salary= $30,000
Suppose you choose option B, what is the opportunity cost of this decision?
Answer: $70,000 + full value of benefits (living in Triangle area, etc.)
Opportunity Cost Example:
Jeopardy 5x champ
Pick a car!
A. Audi TT conv
B. BMW 5 series
C. Mercedes CLK
D. Caddy Escalade (base)
E. Lincoln Navigator
Suppose you choose the Audi, what is the opportunity cost of this decision?
Whichever car would have been your second pick
“There is no such thing as a “free lunch”?
There is an opportunity cost associated with consuming the lunch you didn’t pay for. (give up your time,etc.)
Microeconomics vs Macroeconomics
Microeconomics- Study of small decision making units
Macroeconomics- Study of large decision making units
Types of economics
Health economics, sports, national resources, labor, economic history, money, trade, etc.
What do economists do?
Economists engage in “positive analysis”
Objective use of facts, theory, data, and models (math and stats) to make conclusions about what is or what might happen if…
Objective- Unbiased, lacking personal opinion
Might involve professional opinion
Contrast this idea with “normative analysis”
Opinion-based statements or questions