Lecture1_

Lecture1_ - Thinking Like An Economist LECTURE What is the...

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Thinking Like An Economist LECTURE
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What is the Optimal Class Size? Should there be 12 sections of ECON1001 for non major, with 50 students each? Or only one, with 600 students?
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To Maximize Learning Without Consideration of Cost? Students learn more effectively in smaller classes. Difficulty in learning Size of class
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How would Considering Costs Change our Answer? But smaller classes are also more expensive. Cost per student Size of class Some relevant costs : Faculty salary + expense of providing a classroom: $60,000 per course Per student cost: 1 section: $60,000/600 = $100 12 sections: $60,000/50 = $1,200
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What is the Optimal Class Size? University administrators confront a classic economic trade-off when choosing class size. Size of class Some common measure (likely dollars) Discomfort Cost per student “Best” size of class
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The Scarcity Principle Although we have boundless needs and wants, the resources available to us are limited . Therefore, having more of one thing usually means having less of another. Because of scarcity we must make choices .
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Economics: Studying Choice In a World of Scarcity Microeconomics is the study: of how people make choices under conditions of scarcity and of the results of those choices for society. => Economics is the discipline that is designed to help make appropriate choices .
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Economics: Studying Choice In a World of Scarcity Wants vs. Resources Scarcity Choices (involves compromising between competing activities) The scarcity principle says that for ordinary people, life is made up of “either/or” situations.
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Economics: Studying Choice In a World of Scarcity Examples : Studying economics is chosen over biology because you don’t have time to do both (time is scarce). One car is chosen over two because you can only drive one car at a time (the driver is scarce).
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Economics: Studying Choice In a World of Scarcity Examples : You drive a Ford instead of a Toyota because you don’t have money for both (money is scarce). You choose beans over peas in the cafeteria line because you can only eat one vegetable (stomach capacity is scarce).
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The Rationality Assumption People have well-defined goals and try to fulfill them as best they can. A government seeks peace and prosperity for its citizens. A family seeks economic independence and comfort. A University student seeks good grades plus an interesting and meaningful University experience.
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The Cost-Benefit Principle The process of choosing is aided by the cost-benefit principle . An individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.
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Should I do activity x ? C(
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Lecture1_ - Thinking Like An Economist LECTURE What is the...

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