Welcome to PMBA0608: EconomicsStatistics Foundation

1
Welcome toPMBA0608 Economics/Statistics
Foundation

• Fall 2006
• Sessions 1 August 25

2
Session 1 August 25Introduction

• A little about me
• A little about you
• Family
• Job
• Undergrad degree
• Etc.

3
Personal Index Cards

• Name
• Address
• Email
• Employment Information
• What do you do?
• Undergrad degree
• Major
• Year
• Phone numbers (please list at least 2)
• A screen name for your grade

4
You have received the course contract as an email
attachment

• Did you read it?
• Any questions?
• My website
• http//www.marietta.edu/khorassj/
• My email
• khorassj_at_marietta.edu

5
My teaching philosophy

• Assumptions
• Students can read and understand a lot on their
  own.
• Different students have different learning
  styles.
• Sitting through 3 hours of lecture is boring and
  ineffective for most students.
• Are these assumptions right?

6
My teaching philosophy

• 2. My job
• Is not to transmit knowledge to you.
• Is to design the map that leads you toward
  constructing your own knowledge.
• Is to help you figure out how to ask the right
  questions when you feel lost.
• Is to ask you questions in an attempt to find out
  if you are on the right track.
• Is to give clear and meaningful answers to your
  questions.
• Is this job description acceptable to you?

7
My teaching Philosophy

• 3. Your job
• Is not to absorb the transmitted knowledge like
  sponges.
• Is to study the map.
• Is to follow the map.
• Is to ask questions when you feel lost.
• Is to respond to my questions.
• Is to be prepared to be wrong sometimes. (Being
  wrong is okay as making mistakes is an inevitable
  part of learning.)
• Is this job description acceptable to you?

8
My teaching Philosophy

• 4. Our Job
• Is to create an effective and comfortable
  learning environment, where everybody feels free
  to express his/her thoughts and ideas.

9
My opinion

• Are there stupid questions?
• Sure, they are.
• But if you dont ask, you will remain stupid.

10
Do I like nonsense?

• Yes I like nonsense it wakes up your brain
  cells (Dr. Seuss)

11
Here is a nonsense questionWhy is there
economics?

• Resources are limited (scarce) .
• Wants are unlimited.
• Cant have everything
• Need to choose.
• Economics is the study of how these choices are
  made.

12
Ten principles of economics (Mankiw, Chapter 1)

• Is your job secure?
• What if your job was 100 secure?
• What would that do to your productivity?
• All else being constant, there is a trade off
  between job security and workers productivity.

13
Ten principles of economics

• What was the next best thing you could do with
  your time instead of attending this class?
• 2. There is always a cost associated with an
  activity.
• Opportunity cost value of the next best
  alternative not chosen.

14
Ten principles of economics

• Have you ever bought a concert or airplane ticket
  and later decided not to use it?
• Is it irrational to not go to the concert?

15
Ten principles of economics

• 3. No, rational people think at the margin.
• The 60 you paid for the ticket is gone any way
  (sunk cost). So it is irrelevant.
• Since the day you purchased the ticket, you have
  found a job that pays 100 an hour.
• Marginal cost of going to concert marginal
  benefit ? dont go.

16
Ten principles of economics

• Since Giant Eagle (a supermarkets in Marietta)
  started giving points toward purchasing gasoline,
  my husband never shops anywhere else.
• 4. People respond to incentives.

17
Ten principles of economics

• Will you buy something if it doesnt make you
  better off?
• Will you sell something if it doesnt make you
  better off?
• 5. Trade makes everybody better off.
• This includes international trade
• Trade is not a zero sum game.

18
Ten principles of economics

• Suppose you have a piece of land and want to sell
  it.
• Will you sell it to a farmer or a builder?
• All else being equal, most people will sell it to
  the person who offers them a higher price.
• Why would the builder offer you a higher price?

19
Ten principles of economics

• Because he expects to be able to sell the houses
  at a high price.
• Because there is a shortage of new houses in the
  area.
• Why isnt the farmer offering you a higher
  prices?
• Because there is no shortage of agricultural
  products in the area.

20
Ten principles of economics

• So, is it good that the land was sold to the
  builder instead of the farmer?
• Yes?
• That is market economy at work.
• 6. Markets are usually a good way to organize
  economic activity.

21
Ten principles of economics

• Suppose a nearby shoe factory pollutes the air.
• Who does effectively pay a price for this
  pollution?
• The stock holders who dont live in the area?
• The customers who also dont live in the area?
• The people who live near the factory?

22
Ten principles of economics

• Who should pay a price for this pollution?
• People who benefit from shoe production
• The factory (supplier of shoes) or the customers
  (demanders of shoes).
• This an example of marker failure.
• 7. Government can sometimes improve market
  outcome.

23
Ten principles of economics

• Why do the citizens of some nations have a
  higher living standards than others?
• In part, because they can produce more goods and
  services per hour than others (more productive)
• 8. All else being constant, there is a direct
  relationship between productivity and living
  standard.

24
Ten principles of economics

• Too much of anything lowers its value.
• http//www.overstock.com
• Too much money lowers its value
• 9. Too many dollar bills printed by government ?
  value of each dollar drops? each dollar can buy
  fewer goods and services ?or, dollar price of
  goods and services rises ?inflation

25
Ten principles of economics

• Suppose the prices of good or service that your
  employers supplies drop sharply. (deflation)
• What would that do to profits?
• What if the businesses are not profitable
  anymore?
• Shut down? Layoffs? higher unemployment rate
• 10. In the short run, there is a trade off
  between inflation and unemployment.