First Lecture

Economic Issues and Concepts:
Proff G uses brainwaves, which are obvious and powerful things to know within the course. They are obvious, logical, and fundamental.

Efficiency principle for example. Efficient things are better than inefficient things. Simple, non?

Often in the class, you will have to ask yourself 'what part of what I know will help me answer the question- this is problem solving skills, which you will have to develop.

Article->Question->Which Component of the course do I use.

The Outlines HELP ORGANIZE IT ALL

HOKAY!

Markets are self-organizing. For an example, you have 4 chicks in a nest, and 2 worms. Who gets the worm? This is an example of scare resources (2 worms) which must be distributed amongst competing uses (4 chicks)

Modern free markets solve this problem on their own. You don't have to run things, they run themselves. Adam smith wrote Wealth of Nations in 1776, and there is a nice quote which basically equates to the fact that we rely on others' self interest to bring us the things we require in life (goods and services). You can be both kind and self-interested. Self interest is not a 'bad thing'.

The invisible hand, coined by Adam Smith, is the market.

Command Markets can get it wrong which is wasteful and inefficient. Boot overproduction would be a waste of effort.

Effecieny: How much bang for your buck are out getting. Output/Input.

Marx observed that markets are good at allocating resources. He, however, believed that markets were not fantastic at distributing income in a fair way. He saw that it was not equal; that the workers got practically nothing. He suggested that there is a need for 'big brother' to determine who should get stuff... Yah!

Intervention Principal!

Here are the characteristics of a free market

1: rational self interest:
People are rational
People love themsleves
Decisions are smaller: Marginal benefits must outweigh marginal costs in order for someone to buy something.

2: Incentives:
People respond to incentives.

3: Prices and Quantities

4: Markets are governed by 'rules of the game'
Laws (Property and Contract Laws are big)
Institutions
Manners, Customs, Conventions: Many markets are based on trusts (Japan they need to establish trust; US they sue each other)

Scarcity -> There isn't enough to fill your desire.

Economics is the study of how we manage the worms going to the chicks

Scare resources satisfying UNLIMITED WANT (Is this natural? Do we really need more of everything? We could stop demanding more and more...)

Resources = Factors = Inputs

Outputs = Goods and Services

INPUT: Milk, Mango, Elctricity ---> Production--->OUTPUT: Mango smoothie--->Consumption---> Happiness (Utility)

5 Factors of production:
Capital
Land
Labour
Technological Changes
Entrepreneurship

BUT THEY ARE SCARCE, so we have to make a choice as to what we will do with them.

Politics decides among the unlimited desires.

Goods -> cars
Services -> Haircuts

Choice tradeoff: people make decisions as a tradeoff.

Microeconomics analyzes the decision making: how do you make a choice?

We measure things by their opportunity cost: The value/cost of anything is what you give up to get it (AKA what is the next best alternative that you would have done otherwise?)

Guatamala trip = $4000 O.C.

$2000 for the actual trip, and $2000 in lost wages.

Sunk Costs are costs incurred in the past, and they cannot be recovered, so they are therefore irrelevant. So the past is irrelevant?

If you were waiting for 1 hour, should you have and start walking, or should you wait one more minute?

PPC graphs.

Illustrate 3 concepts. We know this.

But why is it concave.....

Thats all folks

Is there anything which actually is not scarce? Yah- New Ideas aren't scarce! Almost everything else is.