CHAPTER 1

1. CHAPTER 1 • Limits, Alternatives and Choices • McConnell, Brue & Flynn

2. Working towards a 10 !! • Dennis Dare • W1.405 • Mailbox W1.R51 • Mobile: 0.613.787.899 • Email: d.v.dare@hro.nl • http://dennisdare.321.cn

3. Some Important stuff • Attendance is vital, absence can impact your final Coursework mark, except of course, if there is a valid reason for not attending and you have timely informed your teacher of this fact; • Arrive on time for class, after 15 minutes the doors will be locked; if you are late please join us in the 2nd part of the day’s session, i.e. after the break; • You are the no. 1 person responsible to enter class well-prepared, to use and build upon your acquired knowledge, i.e. you develop your skill based on the assigned readings and reviewed material, be active to succeed in this course; • Due to fairness to all students, the minimum required amount of marks is set at four (4), if you miss once and have a valid reason there is no consequence for your marks, miss a 2nd time and your mark is a one (1). If you joined the course late or have missed various tests, your lacking marks will bee filled by ones (1) to compensate the lack of marks; • Laptops, computers and the like are not allowed to be used during class; • You may discuss content (hot issues) of the course, whenever the opportunity is given by your teacher, but other than that you will need to discuss other topics and things outside of the class room, so you won’t disturb those that do want to listen and actively be involved in the class sessions. • Bring along your book to each session.

4. Important • Attendance is vital, absence impacts your grades; • On-time class, if class is disturbed doors might be locked; • Weekly Online test, you are responsible; • During class no laptops, notebooks on; • Discuss other topics outside of class room, do not disturb your fellow classmates; • Bring along your book.

5. Ch. 1: Learning Objectives • Definition of economics • Microeconomics v.s. macroeconomics • Categories of resources • Production possibilities curve • Opportunity costs • Marginal analysis • Budget line & slope

6. Economics Defined A social science that studies the allocation of limited resources to the production of goods and services used to satisfy consumer's unlimited wants and needs. 1-6

7. Economics Defined • Notable phrases in the definition are: • (1) social science, • (2) allocation, • (3) scarce resources, • (4) production, and • (5) unlimited wants and needs.

8. Macro- vs. Microeconomics • Macroeconomics • Aggregate • Microeconomics • Individual Units 1-8

9. Categories of Resources • Scarce resources • Land • Labor • Capital • Entrepreneurial Ability • Factors of production 1-9

10. Small group work

11. Small group work Explain: • (1) social science, • (2) allocation, • (3) scarce resources, • (4) production, and • (5) unlimited wants and needs.

12. Small group work What is the difference between macroeconomics and microeconomics? 1-12

13. Small group work Mention 4 resources or factors of production 1-13

14. Production Possibilities Model • Combination of production choices • Assumptions: • Full employment • Fixed resources • Fixed technology • Two goods 1-14

15. Production Possibilities Table Production Alternatives A B C D E Type of Product Pizzas (in hundred thousands) 0 1 2 3 4 Industrial Robots (in thousands) 10 9 7 4 0 Plot Points to Create Graph… 1-15

16. Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’ Unattainable A Economic Growth B C’ C Industrial Robots D’ D Now Attainable Attainable E’ E 0 1 2 3 4 5 6 7 8 9 Pizzas 1-16

17. Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’ Unattainable A Law of Increasing Opportunity Cost B C’ C Industrial Robots D’ Concave Curve D Attainable E’ E 0 1 2 3 4 5 6 7 8 9 Pizzas 1-17

18. Marginal Analysis Marginal = extra Marginal benefit Marginal cost MB > MC increase MB < MC reduce MB = MC (optimal) 1-18

19. Optimal Allocation of Resources MC a c 15 10 5 0 MB = MC e Marginal Benefit & Marginal Cost b d MB 1 2 3 Quantity of Pizza 1-19

20. Small group work

21. Small group work • Define opportunity costs (use table & graph) • Explain the law of increasing opportunity costs • What is marginal analysis?

22. What is a Budget Line? Income = $120 Income = $120 = 12 = 6 Pb= $10 Pdvd= $20 $120 Budget 12 10 8 6 4 2 0 DVDs $20 Books $10 0 2 4 6 8 10 12 6 5 4 3 2 1 0 Unattainable Quantity of DVDs Attainable 2 4 6 8 10 12 14 Quantity of Paperback Books 1-22

23. How to calculate slope? 12 10 8 6 4 2 0 Quantity of DVDs 2 4 6 8 10 12 14 Quantity of Paperback Books 1-23

24. Key Terms economics economic perspective opportunity cost utility marginal analysis scientific method economic principle other-things-equal assumption macroeconomics aggregate microeconomics positive economics normative economics economizing problem budget line economic resources land labor capital investment entrepreneurial ability factors of production consumer goods capital goods production possibilities curve law of increasing opportunity costs economic growth 1-24

25. CHAPTER 23 • Introduction to Macroeconomics

26. Question set 1 What does macroeconomics study? Key indicators: 1-26

27. Question set 1 What does macroeconomics study? Key indicators: Economic growth GDP (output) Inflation Unemployment 1-27

28. Question 2 How would you assess the health of an economy? 1-28

29. Question 3 What could a business do, if sales of its product drops? 1-29

30. Question set 4 Why would prices be ‘sticky’? What is the impact of inflexible prices? 1-30