8.27.08 - ECONOMICS 1 Professor Kenneth Train Lecture 1...

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ECONOMICS 1 Professor Kenneth Train 8/27/08 Lecture 1 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy or illegally distribute (electronically or otherwise) these notes. Our student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. LECTURE I am Professor Train and this is Econ 1. Economics changes the way you think about the world. In fact I think there is no better way to motivate the class then to look at headlines for the past few days. It is hard to understand how to read the newspaper without a background in economics. The economy is slowing down. Production is not as high as it should be. But we are getting incipient cues that inflation is picking up. Unfortunately trying to solve one problem will make the other worse. How did we get here? How can we prevent this from happening? The importance of this is all of this has impacts on the market. The increase in producer prices caused the stock market to drop in the exact same day. You would think if there are higher prices then there will be higher profits. But what the government has to do to fix this will hurt the economy and the stock market dropped in anticipation. This will hurt your pocket book if you have money in the stock market. How many of you have money in the stock market? Have you lost money recently? And, the other thing that happened in the same day is that the dollar tumbled. What does that mean? Is the dollar rolling down the hill? And is this good or bad? It is actually paradoxical. The dollar goes down in value relative to other currencies when stock market drops or inflation is kicking in. But when the dollar goes down in value it helps out economy. If you do not understand this, you will not understand what this means. This is what we will study in macroeconomics. Then there is this other headline. Microsoft just cannot seem to get a break, can it? Nobody uses Netscape anymore. Microsoft was found guilty of violating antitrust laws. That case went on for many years but was settled by the government. But this is happening in other countries, Europe, and now Taiwan. Why would people pick on Microsoft? The basic idea of economics is that competition is beneficial and the exercise of monopoly power is bad and Microsoft is as close to a monopoly as you can get in this country. We want to know why we want to prevent this and in what conditions we should stop them. Should we? Microsoft has done a good many worthwhile things. We want to see what our laws are, and what is and is not illegal. I do not see how, without the basic knowledge of economics, you would care what Microsoft is doing. All this is on the microeconomic side and in this course you will see how that affects society as a whole. Another headline I like, and this is my favorite,
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This note was uploaded on 07/25/2011 for the course ECON 1 taught by Professor Martholney during the Fall '08 term at Berkeley.

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8.27.08 - ECONOMICS 1 Professor Kenneth Train Lecture 1...

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