Unit 1

Econ 200: Introduction to Microeconomics

What is Economics?

  • Definitions:

    • Alfred Marshall (1890): ‐A study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.‑

    • Lionel Robbins (1932): ‐The science which studies human behavior as a relationship between ends and scarce means which have alternative uses.‑

    • Jacob Viner (1932): ‐What economists do.‑

  • Core Principle:

    • People make choices to attain their goals.

    • Choices arise due to scarcity:

    • Definition of Scarcity: A situation in which unlimited wants exceed the limited resources available to fulfill those wants.

    • Economics is the study of these choices.

    • Economists utilize economic models:

    • Definitions: Simplified versions of reality used to analyze real-world economic situations.

Scarce Resources

  • Common examples of scarce resources include:

    • Money

    • Food

    • Clean air

    • Clean water

    • Farmable land

    • Time

Typical Economics Questions

  • Examples of questions studied in economics:

    • How are prices determined?

    • Why do governments control some prices? What effects do these controls have?

    • Why do college graduates make more money?

    • How do divorce laws relate to health?

    • Did Seattle’s sweetened beverage tax affect health outcomes?

    • How do Seattle’s ‐Democracy Vouchers‑ change campaign finance?

    • What if I could sell future income to pay for college?

    • What is the effect of having a daughter on women’s decision-making power?

    • What is the correct way to estimate air pollution?

    • Does access to mobile banking promote entrepreneurship in sub-Saharan Africa?

Three Key Principles of Economics

  • Principle 1: People are Rational

    • Definition of Rationality: Using all available information to achieve one’s goals.

    • Rational consumers and firms weigh costs and benefits of each potential action to make the best decision possible.

  • Principle 2: Optimal Decisions at Margin

    • Decision-making involves calculating opportunity costs and is made at the margin.

    • Opportunity Cost: The true cost of a choice, which is the value gained by choosing the next-best alternative.

    • Marginal Cost (MC): The additional cost associated with a small increase in an action.

    • Marginal Benefit (MB): The additional benefit gained from a small increase in an action.

    • Examples of application:

    • Decision about watching TV or doing homework when time-limited.

    • Incentives at an all-you-can-eat buffet.

  • Principle 3: People Respond to Incentives

    • Definition of Incentive: Something that influences behavior by changing marginal costs or benefits.

    • Examples:

    • Decision to study or watch TV changes if there is an imminent exam.

    • Group lending implication: If one defaults, no future borrowing allowed.

    • Rewarding completion of vegetables with dessert.

Economics as a Science

  • Types of Analysis:

    • Positive Analysis: The study of the way things are (factual analysis).

    • Normative Analysis: The study of the way things should be (value judgments).

    • Economists' Focus: Typically perform positive analysis due to complexity of human behavior.

  • Example of Analytical Distinctions:

    • Should student loan debt be canceled?

    • Economists can analyze:

      • Costs of loan cancellation

      • Benefits for recipients/economy

      • Most benefiting groups

      • Behavioral changes in future borrowers

    • Economists cannot answer:

      • Fairness or moral implications

      • Priority of groups for government support

Areas of Economics

  • Microeconomics:

    • Focuses on:

    • How households and firms make choices.

    • Interaction of households and firms in markets.

    • Government influence on choices.

  • Macroeconomics:

    • Examines the economy as a whole including:

    • Inflation

    • Unemployment

    • Economic growth

  • Econometrics:

    • The study of statistics as applied to economics.

Succeeding in Econ 200

  • Key Actions for Success:

    • Read the syllabus thoroughly

    • Check Canvas for:

    • Course announcements

    • TA information

    • Required readings

    • Course slides

    • Homework assignments

    • Read the textbook

    • Complete all exercises from the textbook and attend class

Grading Breakdown

  • Homework: 20% (lowest grade dropped)

  • Writing Assignments: 20% (lowest grade dropped)

  • Midterm Exam: 30%

  • Final Exam: 30% (non-cumulative)

Homework Details

  • Submissions:

    • Completed online in Canvas

    • Due every Monday by 11:59 PM

    • Based on work from the previous week

    • No late submissions accepted; lowest score dropped

    • Highest score recorded from two attempts

    • Collaboration permitted but must submit individual work

Exam Details

  • Exam Format:

    • Two non-cumulative exams containing 4 to 5 questions

    • No notes or books allowed during exams

    • Any non-internet-connected calculator permitted

  • Preparation Opportunities:

    • Practice exams and review sessions will be held prior to each exam

TA Sections and Office Hours

  • TA Sections:

    • Held on Fridays

    • Focus on writing assignments and question opportunities

  • Office Hours:

    • Instructor's Office Hours:

    • Tuesdays: 3:00 PM – 4:00 PM

    • Thursdays: 11:00 AM – 12:00 PM

    • Location: Savery 334

    • TA office hours: Details provided by the TA

    • Encouraged to ask questions via email.

  • Instructor: Yael Midnight

  • Background:

    • Grew up in Cleveland, Ohio

    • Undergraduate degree in economics and math from Washington University in St. Louis, 2014

    • Ph.D. from Duke University, 2020

    • Teaching experience since 2020 at UW

    • Courses taught include:

    • Financial Economics (422)

    • Macroeconomics (201)

    • Econometrics (382)

    • Honors Program (396)

    • Teaching Economics (602)

    • Sports Economics (216)

  • Personal interests: Cats named Cornie and Bertie

What is Economics?

  • Definitions:

    • Alfred Marshall (1890): “A study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.”

    • Lionel Robbins (1932): “The science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

    • Jacob Viner (1932): “What economists do.”

  • Core Principle:

    • People make choices to attain their goals.

    • Choices arise due to scarcity:

    • Definition of Scarcity: A situation in which unlimited wants exceed the limited resources available to fulfill those wants.

    • Economics is the study of these choices.

    • Economists utilize economic models:

    • Definitions: Simplified versions of reality used to analyze real-world economic situations.

Scarce Resources

  • Common examples of scarce resources include:

    • Money

    • Food

    • Clean air

    • Clean water

    • Farmable land

    • Time

Typical Economics Questions

  • Examples of questions studied in economics:

    • How are prices determined?

    • Why do governments control some prices? What effects do these controls have?

    • Why do college graduates make more money?

    • How do divorce laws relate to health?

    • Did Seattle’s sweetened beverage tax affect health outcomes?

    • How do Seattle’s “Democracy Vouchers” change campaign finance?

    • What if I could sell future income to pay for college?

    • What is the effect of having a daughter on women’s decision-making power?

    • What is the correct way to estimate air pollution?

    • Does access to mobile banking promote entrepreneurship in sub-Saharan Africa?

Three Key Principles of Economics

  • Principle 1: People are Rational

    • Definition of Rationality: Using all available information to achieve one’s goals.

    • Rational consumers and firms weigh costs and benefits of each potential action to make the best decision possible.

  • Principle 2: Optimal Decisions at Margin

    • Decision-making involves calculating opportunity costs and is made at the margin.

    • Opportunity Cost: The true cost of a choice, which is the value gained by choosing the next-best alternative.

    • Marginal Cost (MC): The additional cost associated with a small increase in an action.

    • Marginal Benefit (MB): The additional benefit gained from a small increase in an action.

    • Examples of application:

    • Decision about watching TV or doing homework when time-limited.

    • Incentives at an all-you-can-eat buffet.

  • Principle 3: People Respond to Incentives

    • Definition of Incentive: Something that influences behavior by changing marginal costs or benefits.

    • Examples:

    • Decision to study or watch TV changes if there is an imminent exam.

    • Group lending implication: If one defaults, no future borrowing allowed.

    • Rewarding completion of vegetables with dessert.

Economics as a Science

  • Types of Analysis:

    • Positive Analysis: The study of the way things are (factual analysis).

    • Normative Analysis: The study of the way things should be (value judgments).

    • Economists' Focus: Typically perform positive analysis due to complexity of human behavior.

  • Example of Analytical Distinctions:

    • Should student loan debt be canceled?

    • Economists can analyze:

      • Costs of loan cancellation

      • Benefits for recipients/economy

      • Most benefiting groups

      • Behavioral changes in future borrowers

    • Economists cannot answer:

      • Fairness or moral implications

      • Priority of groups for government support

Areas of Economics

  • Microeconomics:

    • Focuses on:

    • How households and firms make choices.

    • Interaction of households and firms in markets.

    • Government influence on choices.

  • Macroeconomics:

    • Examines the economy as a whole including:

    • Inflation

    • Unemployment

    • Economic growth

  • Econometrics:

    • The study of statistics as applied to economics.