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1 - Economics 1 Economics 1 Administration Section GSI's...

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1 06/25/2007 Economics 1 Lecture 1 Economics 1 Instructor – David Owens Lecture: MW 10-12, 10 Evans Hall Office Hours: MW 1-2, 608-1 Evans Hall Exams (In Class): Midterm 1: July 16 Midterm 2: August 6 • Final: August 15 06/25/2007 Economics 1 Lecture 1 Economics 1 - Administration • Section – GSI’s: Colleen Donovan,Ashley Langer, Sepideh Modrek, Jim Sly • Enrollment • Grading Course Website http://courseweb.berkeley.edu/coursweb/pub/courses/2007/Su/ECON/1/001 06/25/2007 Economics 1 Lecture 1 • Readings Problem Sets Lecture Slides Excused Absence from Exams Re-Grade Requests Academic Honesty Special Accommodations Economics 1 - Administration 06/25/2007 Economics 1 Lecture 1 Economics Defined Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. Economics is not the study of money Economics is not Mathematics 06/25/2007 Economics 1 Lecture 1 Economics Defined An Economic Decision: – A nomadic caveman is caught out in the rain. He comes across enough wood to build a shelter or make a fire, but not both. Which does he choose? 06/25/2007 Economics 1 Lecture 1 Economics Defined People turn resources into stuff Somebody gets the stuff
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2 06/25/2007 Economics 1 Lecture 1 Chapter 1 The Scope and Method of Economics 06/25/2007 Economics 1 Lecture 1 Three Fundamental Concepts Opportunity cost Marginalism / Marginal Analysis Efficient markets 06/25/2007 Economics 1 Lecture 1 Opportunity Cost Opportunity cost is the best alternative that we forgo, or give up, when we make a choice or a decision. Nearly all decisions involve trade-offs. “No Free Lunch” 06/25/2007 Economics 1 Lecture 1 Example: For the caveman, the opportunity cost (OC) of making a fire is the shelter he could have built if he had chosen not to make the fire. The OC of building a shelter is the fire he could have otherwise built. Opportunity Cost 06/25/2007 Economics 1 Lecture 1 Example: Donald Trump offers you ONE of the following items, free of charge – A sandwich – A house in the Hamptons What is the “cost” of the sandwich? Opportunity Cost 06/25/2007 Economics 1 Lecture 1 In weighing the costs and benefits of a decision, it is important to weigh only the costs and benefits that arise from the decision. Ignore “Sunk Costs” Marginalism / Marginal Analysis
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3 06/25/2007 Economics 1 Lecture 1 Situation A – A store offers a $20 bill for a price of $25 – Should you buy it? Situation B – You pay $15 to get into a store – The store offers a $20 bill for a price of $10 What is the total price of the $20 bill? Should you buy it? Difference between A and B? Marginalism / Marginal Analysis 06/25/2007 Economics 1 Lecture 1 To be discussed in detail beginning in chapter 6.
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