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Welcome to ECON 160

Welcome to ECON 160. Principles of Microeconomics richard.tontz@csun.edu http://www.csun.edu/~rlt50610/ Aplia Course Key: 5TS6-7CEH-MEVL. Econ 160. The Economic System of Competition. Review: Definitions. Good : is anything that an individual wants to have more of, at zero price.

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Welcome to ECON 160

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  1. Welcome to ECON 160 Principles of Microeconomics richard.tontz@csun.edu http://www.csun.edu/~rlt50610/ Aplia Course Key: 5TS6-7CEH-MEVL

  2. Econ 160 The Economic System of Competition

  3. Review: Definitions Good : is anything that an individual wants to have more of, at zero price. Resource: Anything that can be used to produce goods. Scarcity: A good is scarce if the amount desired at zero price is more than the amount available at zero price.

  4. Review:Assumptions • Humankind has unlimited wants • Our resources are limited • Scarcity: Individually, and as a Society, we do not have enough resources to produce all the things we want.

  5. Review:Implications of Scarcity • Choice: people must choose which goods to acquire. • Economic Cost: The Cost of any action, is the personal value of the next highest valued alternative given-up. • Competition: We are in a state of competition for the use of resources

  6. Forms of Competition in Society • Violence, or Threat of Violence • Social/Political: competition on the basis of some limited behavior or characteristic • Economic/Market: competition based on offering the highest value in exchange.

  7. Scarcity  Society Choices • What to produce? Goal find the mixture of outputs that maximizes society’s value. • How to produce? Goal: find the optimal mix of inputs to maximize technical output. • For whom to produce? Who will get to consume the goods produced.

  8. What Economics Is About • Microeconomics: decisions of individuals and firms: what to buy and what to produce. • Macroeconomics: the whole economic system and the role of government.

  9. Mechanisms of Choice • Political: our representatives make choices • Economic/market: individuals and firms make choices based on relative prices about what to produce

  10. Ten Principles of Economics • Individual decision making • How people interact • The economy as a whole

  11. Individual Decision Making • People Face Trade-offs: Choice • Opportunity Cost • Rational people think at the margins • People respond to incentives

  12. How People Interact • Trade Makes everyone better off • The market system organizes production efficiently • Markets outcomes can sometimes be improved upon by Government

  13. The Economic/Market Form of Competition

  14. Circular Flow Diagram of the Exchange Economy Goods & Services Goods & Services Product Markets $'s $'s Revenue HOUSEHOLDS FIRMS $'s $'s Income Inputs Resources Resource Markets

  15. Economic Agents & Decision-making • Households: Decisions: What to sell? What to buy? Assume Maximize Utility • Firms: Decisions: What inputs to use? What to produce? Assume Maximize Profits. • Markets: Factor Markets, Product Markets Role of Money: The medium of exchange

  16. Definition of Money • Currency in Circulation: Currency outside of Banks in the hands of households,or firms • Checkable deposits in Banks, Savings & Loans, Credit Unions

  17. Assignments • Check Aplia for Assignment due Sunday Night • Read Chapter 3 • Check for new Classnotes & Powerpoints

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