Thinking Like An Economist MB MC 匚 CHAPTER
MB MC Thinking Like An Economist
Overview 1 a Chapter I introduces the concept of scarcity as applied in economics(also the No-Free-Lunch Principle). It presents the unavoidable fact that our needs and wants are unlimited and resources available to satisfy them are limited
MB MC Overview 1 ◼ Chapter 1 introduces the concept of scarcity as applied in economics (also the No-Free-Lunch Principle). It presents the unavoidable fact that our needs and wants are unlimited and resources available to satisfy them are limited
Overview 2 The chapter goes on to show that making decisions based on the comparison of costs and benefits is a useful approach to decision making in an environment of scarcity. It addresses the problems created by ignoring relevant costs(e.g opportunity costs) and including irrelevant costs (e.g, sunk costs), and using average rather than marginal analysis. The difference between micro and macro economics Is presented, as well as the use of marginal analysis and the concept of opportunity cost
MB MC Overview 2 ◼ The chapter goes on to show that making decisions based on the comparison of costs and benefits is a useful approach to decision making in an environment of scarcity. It addresses the problems created by ignoring relevant costs (e.g. opportunity costs) and including irrelevant costs (e.g., sunk costs), and using average rather than marginal analysis. The difference between micro and macro economics is presented, as well as the use of marginal analysis and the concept of opportunity cost
Introduction Question a What is the Optimal class size? e To maximize learning without consideration of cost? o How would considering costs change our answer? o A personal tutorial course in economics might cost $20,000 .A class of 300 students might cost $100/student Chapter 1: Thinking Like an Economist Slide 4
MB MC Chapter 1: Thinking Like an Economist Slide 4 Introduction ◼ Question; ◼ What is the Optimal Class Size? ⚫ To maximize learning without consideration of cost? ⚫ How would considering costs change our answer? ◆ A personal tutorial course in economics might cost $20,000 ◆ A class of 300 students might cost $100/student
Introduction a What is the optimal class size? o What trade-offs must university administrators and students consider when choosing class size? Chapter 1: Thinking Like an Economist Slide 5
MB MC Chapter 1: Thinking Like an Economist Slide 5 Introduction ◼ What is the Optimal Class Size? ⚫ What trade-offs must university administrators and students consider when choosing class size?
A Economics: Studying Choice In a World of Scarcity Wants vs Resources Scarcity Choices Chapter 1: Thinking Like an Economist Slide 6
MB MC Chapter 1: Thinking Like an Economist Slide 6 Economics: Studying Choice In a World of Scarcity Wants vs. Resources Scarcity Choices
A Economics: Studying Choice In a World of Scarcity a The Scarcity Principle o Boundless wants cannot be satisfied with limited resources Therefore, having more of one thing usually means having less of another o Because of scarcity we must make choices Chapter 1: Thinking Like an Economist Slide 7
MB MC Chapter 1: Thinking Like an Economist Slide 7 Economics: Studying Choice In a World of Scarcity ◼ The Scarcity Principle ⚫ Boundless wants cannot be satisfied with limited resources. ⚫ Therefore, having more of one thing usually means having less of another. ⚫ Because of scarcity we must make choices
A Economics: Studying Choice In a World of Scarcity Economics The study of how people make choices under conditions of scarcity and of the results of those choices for society. Chapter 1: Thinking Like an Economist Slide 8
MB MC Chapter 1: Thinking Like an Economist Slide 8 Economics: Studying Choice In a World of Scarcity ◼ Economics ⚫ The study of how people make choices under conditions of scarcity and of the results of those choices for society
A Economics: Studying Choice In a World of Scarcity a The Cost-Benefit Principle o 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 Chapter 1: Thinking Like an Economist Slide 9
MB MC Chapter 1: Thinking Like an Economist Slide 9 Economics: Studying Choice In a World of Scarcity ◼ 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
A Economics: Studying Choice In a World of Scarcity a choosing the optimal class size Revisited Assumptions e Two class sizes: 100 and 20 o Introductory economics classes have 100 students ● Question e Should the class size be reduced to 20 students Chapter 1: Thinking Like an Economist Slide 10
MB MC Chapter 1: Thinking Like an Economist Slide 10 Economics: Studying Choice In a World of Scarcity ◼ Choosing the Optimal Class Size Revisited ⚫ Assumptions: ◆Two class sizes: 100 and 20 ◆Introductory economics classes have 100 students ⚫ Question ◆Should the class size be reduced to 20 students?
