Welcome to
PMBA0608:
Economics/Statistics
Foundation
Fall 2006
Sessions 1 August 25
Session 1: August 25
Introduction
 A little about me
 A little about you
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Family
Job
Undergrad degree
Etc.
Personal Index Cards
1.
2.
3.
4.
Name
Address
Email
Employment Information
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What do you do?
5. Undergrad degree
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Major
Year
6. Phone numbers (please list at least 2)
7. A screen name for your grade
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@marietta.edu
My teaching philosophy
1. 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?
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?
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?
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.
My opinion
Are there stupid
questions?
Sure, they are.
But if you don’t ask, you
will remain stupid.
Do I like nonsense?
Yes; “I like nonsense; it wakes up your
brain cells (Dr. Seuss)”
Here is a nonsense question:
“Why is there economics?”
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Resources are limited (scarce) .
Wants are unlimited.
Can’t have everything
Need to choose.
Economics is the study of how
these choices are made.
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?
1. All else being constant, there is a
trade off between job security and
workers’ productivity.
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.
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?
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  don’t go.
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.
Ten principles of economics
 Will you buy something if it doesn’t
make you better off?
 Will you sell something if it doesn’t
make you better off?
5. Trade makes everybody better
off.
 This includes international trade
 Trade is not a zero sum game.
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?
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 isn’t the farmer offering you a
higher prices?
 Because there is no shortage of
agricultural products in the area.
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.
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 don’t live in the
area?
 The customers who also don’t live in the
area?
 The people who live near the factory?
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.
Ten principles of economics
 Why do the citizen’s 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.
Ten principles of economics
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9.
Too much of anything lowers its value.
http://www.overstock.com
Too much money lowers its value
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
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.