Microeconomic Analysis
Lecture 1. Introduction
EC101 DD & EE / Manove Introduction
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Announcements
Check the course website frequently:
http://sites.bu.edu/manove-ec101/
No discussion sections until Tuesday, Sept 9.
Be sure that you are registered for LaunchPad
(instructions on course website). You can pay
later.
Please don’t be late for class.
EC101 DD starts promptly at 11:00 am.
EC101 EE starts promptly at 2:00 pm.
EC101 DD & EE / Manove Introduction>Announcements
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Final Exams:
Lecture DD, Dec 16 at 12:00-2:00 pm, Stone B50
Lecture EE, Dec 16 at 3:00-5:00 pm, Stone B50
Get your air tickets soon, but DO NOT PLAN TO
LEAVE before you take your final exam.
EC101 DD & EE / Manove Introduction>Announcements
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Course Staff
Instructor: Michael Manove
We teach EC101 DD and EE in parallel.
Lectures on the same day will be similar.
But you must attend your own lecture.
My Office Hours: T 5:15−6:15 pm, F 10 −12 noon.
Head Teaching Fellow for
DD and EE: Anindya Chakrabarti
Anindya will give me and the other TFs
feedback on our teaching.
EC101 DD & EE / Manove Introduction>Course Staff
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TFs & Discussion Sections
Teaching Fellows:
Anindya Chakrabarti
[D8, E1]
Bruno Martins
[D7, E7]
Christoph Walsh
[D2, D4, E0]
Juan Conde
[D9, E3]
EC101 DD & EE / Manove Introduction>Course Staff
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TFs & Discussion Sections [Cont’d]
Teaching Fellows:
Mesay Gebresilasse
[D6, E5]
Nicholas Saponara
[D3, E2, E4]
Phillip Ross
[E8, E9]
Shree Ravi
[D1, D5]
You are required to know your Discussion
Section number and the name of your TF.
EC101 DD & EE / Manove Introduction>Course Staff
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How to get an A in EC101
EC101 DD & EE / Manove Introduction>How to get an A
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 Never miss class
 Keep up with readings and problems.
 Get help when things go wrong.
EC101 DD & EE / Manove Introduction>How to get an A
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Your clicker or smartphone app:
Many of you will buy your clicker or ResponseWare
smartphone app sometime soon…
but if you already have a clicker or app take out your
device for a demonstration.
Log into your app and enter the session number.
Set your clicker to Channel 41.
Press Channel, then 4, then 1, then Channel.
Never press Channel unless you are changing the
channel. The clicker is always turned on.
After you buy your clicker or app, register it online.
On the course website go to
Classes>Clicker Registration.
EC101 DD & EE / Manove Introduction>Clicker
EC101 DD & EE / Manove Clicker Question
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Economists
If you don’t have a medical degree, and you
call yourself a “doctor” and treat patients,…
you will be arrested for “practicing medicine
without a license.”
But anyone can legally call himself an
“economist”…
EC101 DD & EE / Manove Introduction > Economists
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Thinking like an
economist
Bricklayers, baseball players and bartenders
have a special way of thinking about the world.
So do economists.
Economic thinking helps us see things that
other people might miss.
We believe that economic thinking is often
useful in decision-making.
Here are some basic principles of economic
thinking.
EC101 DD & EE / Manove Introduction>Thinking
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1. Think about the goods
(not the money)
Example: Black Monday (Oct 19, 1987)
US stock market lost 22.6% of its value.
$500 billion seemed to
disappear.
Where did it go?
Did society become $500
billion poorer because of
the stock-market crash?
EC101 DD & EE / Manove Introduction>Thinking>Goods Not Money
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Let’s look at the goods:
Did factories disappear
on Black Monday?
Did the CEO’s desk vanish from under his
nose?
Did TV’s on the shelves
of appliance stores
dissolve into thin air?
EC101 DD & EE / Manove Introduction>Thinking>Goods Not Money
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The material wealth of society did not
change.
But investors revised their beliefs about its
value—downwards.
This is bad for sellers of assets (like
houses),
…but it may be good for buyers of assets,
who can now get them for cheap.
Effects on the production of goods
and services???
EC101 DD & EE / Manove Introduction>Thinking>Goods Not Money
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2. Everything has a cost.
The cost of something is what you give up to
get it.
Economists call this the “opportunity cost.”
Example: The cost of an A on an econ exam?
An evening of fun with your friends,…
…because you have to study instead.
Example: The cost of having kids?
EC101 DD & EE / Manove Introduction>Thinking>Cost
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Opportunity Cost
What is the difference between the cost of
something and its “opportunity cost”?
Answer: there is no difference.
The opportunity cost embodies the
economic concept of cost.
The cost is the opportunity that has to be
sacrificed in order to get something or do
something.
EC101 DD & EE / Manove Introduction>Thinking>Opportunity Cost
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Opportunity Cost: Examples
Do you want to buy an Alpha Romeo?
Then you can’t afford a vacation in Italy.
(The vacation is the opportunity cost of the car.)
EC101 DD & EE / Manove Introduction>Thinking>Opportunity Cost
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Do you want to get an A in Economics?
Then you cannot socialize with your friends
every night.
(Socializing with friends is an opportunity cost of
the A.)
EC101 DD & EE / Manove Introduction>Thinking>Opportunity Cost
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EC101 DD & EE / Manove Clicker Question
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3. When deciding “how many,”
think at the margin.
 The marginal unit is the unit you are evaluating.
 Example: If I already have four apples, how much
is the fifth apple worth to me? The fifth apple is
the marginal unit.
Marginal benefit is the benefit provided by the
marginal unit.
Marginal cost is the opportunity cost of the
marginal unit.
When deciding how many units to buy, sell or
use, marginal benefits and marginal costs
should be compared.
EC101 DD & EE / Manove Introduction>Thinking>The Margin
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Example: How Many Pizza Slices should I buy?
You are eating pizza slices.
Each slice costs $1
Should you eat 4 slices?
Your analysis of the problem:
4 slices costs me $4
I get $5 worth of pleasure from 4 slices.
So I’ll eat 4 slices.
EC101 DD & EE / Manove Introduction>Thinking>The Margin
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Economic Thinker’s Analysis
The 4th slice would cost me $1.
But if I’ve already eaten 3 slices, I won’t be
very hungry.
So my benefit from the 4th slice wouldn’t be
worth $1.
I won’t buy it.
The 4th slice is “the marginal unit.”
Here, we are thinking “at the margin.”
EC101 DD & EE / Manove Introduction>Thinking>The Margin
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EC101 DD & EE / Manove Clicker Question
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End of File
EC101 DD & EE / Manove End of File
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