Lecture 1 - Econ 201 Lecture 1 Should there be twelve...

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Econ 201 Lecture 1 Should there be twelve sections of Econ 101 or only one? Students learn more effectively in smaller classes. But smaller classes are also more expensive. Some relevant costs: Faculty salary: $60,000 per “course” Per student faculty salary cost: one section: $60,000/300 = $200 twelve sections: $60,000/25 = $2400 If you were currently in a class with 300 students, would you be willing to pay $2200 to switch to one with only 25 students? The Scarcity Principle (Also called the No-Free-Lunch Principle) Although we have boundless needs and wants, the resources available to us are limited. So having more of one good thing usually means having less of another. Microeconomics entails the study of how people choose under conditions of scarcity. The Rationality Assumption: People have goals and try to fulfill them as best they can. Cost-benefit analysis Should I do activity x? C(x) = the costs of doing x B(x) = the benefits of doing x If B(x) > C(x), do x; otherwise don't. Example 1.1. Should I turn down my stereo?
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