Gerardo

Jacobs
gjacobs@eco.uc3m.es
Despacho 11.2.05
Course Coordinator
Reduce Class Professor
Lecture
Mondays 12:30 - 1:30
FINAL EXAM 40 %
TWO MIDTERM EXAMS 40%
SIX PROBLEM SETS 15%
QUIZZES 5%
https://sites.google.com/site/
jacobsuc3m/
THE TEXTBOOK
10
11
Required knowledge
!
Elementary calculus: percentages,
!
Solution of linear equations with one unknown.
!
Solution of two linear equations with two unknowns (by
substitution).
!
Plot of linear equations in 2D graphs. Relationship with
solutions to two linear equations with two unknowns.
!
Graphic interpretation of the slope of a line.
!
Computing elementary areas (triangles and rectangles).
NO
TALKING
NO
TEXT
MESSAGING
TOPIC I.
Introduction
Chapters 1-2 Mankiw
What is economics?
Economics
is the study of how society
manages its scarce resources
Scarcity
Resources are limited !!
19
and society has
UNLIMITED desires...
Scarcity
because of this society can not produced all
the goods that are needed
Resources are limited
Choice:
Management means to choose
the use of a scarce resource
Choice and Scarcity:

Because of scarcity you have to decide and

renounce to an available choice
23
Opportunity Cost
24
Example
B > C > D > A > E
Which is my OPPORTUNITY COST?

Opportunity Cost is the BEST
alternative option AVAILABLE
25
My Girlfriend My Opportunity Cost
X
True or False ?
Which is my choice ?
26
Example
Which one is my scarce resource ?
1 2 3 4 5
and my opportunity cost ?
27
Choice:
29
What

How

For whom
30
31
32
33
34
35
ONE
Condition
Efficiency
37
PRODUCTION EFFICIENCY
Impossible to reassign PRODUCTION RESOURCES
without reducing the PRODUCTION of one good or
service.
38
39
CONSUMPTION EFFICIENCY
Impossible to reassign FINAL GOODS AND
SERVICES without reducing the welfare of one
INDIVIDUAL.
40
41
Economics studies the conditions
under which the allocation of
resources and goods is EFFICIENT Economics studies the conditions
under which the allocation of
resources and goods is EFFICIENT
Economics studies the conditions
under which the allocation of
resources and goods is EFFICIENT
Economics studies the conditions
under which the allocation of
resources and goods is EFFICIENT
Economics studies the conditions
under which the allocation of
resources and goods is EFFICIENT
Equity
Efficient butunequal
efficiency VS equity ?
In this course we will ONLY deal with EFFICIENCY
Two types of analysis
"
Positive Economics

"
Normative Economics
!
Scarcity
!
Choice
!
Opportunity Cost
!
Efficiency
!
Equity
45
Copyright 2004 South-Western/Thomson Learning
Reviewing Concepts:
Production Possibilities Frontier
Concepts Illustrated by the Production
Possibilities Frontier
Efficiency
Tradeoffs
Opportunity Cost
Economic Growth
Figure 2 The Production Possibilities Frontier
Copyright2003 Southwestern/Thomson Learning
Production
possibilities
frontier
A
B
C
Quantity of
Cars Produced
2,200
600
1,000
300 0 700
2,000
3,000
1,000
Quantity of
Computers
Produced
D
Who decides ?
What?
How?
For whom?
49
MARKETS
51
52
Do markets make
efficient allocations ?
54
56
Markets
are not
very
efficient
.but
they do a
very good
job
57
What happens if a market is
not efficient
can he help ?
59
this Course is about
60
The Role of the
!
Scarcity
!
Choice
!
Opportunity Cost
!
Efficiency
!
Equity
61
!
The Role of Markets
!
The Role of the State
See you next
Wednesday!
Gerardo Jacobs
<gjacobs@eco.uc3m.es>