(Success is a Personal Choice)
Treat a person as he is, and he will remain as he is. Treat him as he could be, and he will become what he should be.
Primary Course Learning Objectives
• Analyze how demand and supply interact to determine prices and wage rates;
• Demonstrate, based on an analysis of revenues and costs, how a firm determines production levels, when to hire and fire workers, and the timing of plant expansions and closings;
• Identify, characterize, and analyze the implications of different market structures;
• Explain how GDP, unemployment, and inflation are measured;
• Understand the factors underlying economic growth and the business cycle; and
• Examine the implications of monetary and fiscal policies and how their effects are transmitted throughout the economy.
Current Lecture Learning Objectives
Students will address issues of efficiency, personal freedoms, and fairness by
• Analyzing how free markets maximize efficiency, total societal income, and customer satisfaction, while determining objectively the distribution of income based on the individual’s contribution
• Investigating the role of individual choices, property rights, and incentives in a free market economy
• Exploring how markets, firms, and households interact to determine production and sale of products/services and the resulting income generated
• Exploring the challenges of determining an appropriate income distribution and
• Analyzing the role of government in a free market economy
Free markets refer to markets subject to relatively few government restrictions on households and firms.
What is Economics?
Economics is the study of how individuals make choices among a range of reasonable options in a world of limited resources.
• Limited resources create opportunity costs
• Opportunity costs represent what we have to give up when we make a choice
• Individuals pursue their own self interest by making choices whose perceived benefit exceeds their associated opportunity costs
Question: Do individuals always make rational choices? Give examples to illustrate your answer?
Why is Economics Relevant?
• Question: Why do we need to learn economics? • Answer: Economics helps us to make informed choices about
– Career selection and progression
– Managing money (investing, saving, and borrowing) – Electing government officials
Micro Versus Macro Economics
– Economic Issues,
Terminology, and Methods
– Determinants of Demand,
Supply, and Price
– Elasticity of Demand and
– Economics of the Firm
– Highly Competitive &
– Concentrated Markets
– Measuring GDP,
Employment, and Inflation
– Determinants of Economic
– Analyzing the Business
– Understanding Monetary
– Understanding Fiscal
– Government Policy and Its
Impact of Aggregate
Demand and Supply
Competition and Markets
• Competition is the process by which millions of people make billions of decisions acting in their own selfinterest to acquire scarce resources for themselves.
• Markets represent the arena in which decisions resulting in the trading of goods and services are said to occur.
• Trading takes place when the perceived value of what is received exceeds what one has to give up (i.e., price or opportunity cost)
• Prices ration scarce resources according to the collective wisdom of market participants1
• Most markets are subject to varying degrees of government regulation
Note access to scarce resources may also be limited by government rationing according to the wisdom of a bureaucrat. Economy Characterized by
Three Major Markets
• Markets for Goods and Services
– Firms sell
– Households buy
• Markets for Factors of Production (Land, Labor, and Capital)
– Households sell
– Firms buy
• Domestic and Foreign Financial Markets
--Equity (Common & Preferred)
--Debt (Maturity > 1 year)
--Money (Maturity < 1 year)