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1、Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Microeconomics Lectured by: Xianming Zeng (曾宪明曾宪明) Tel: (691278) Email: 1Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.I. Course Description This course is an introduction to part of economics called Microeconomics which stu
2、dies how individuals and firms make decisions. The other main branch of economics is called Macroeconomics which looks at the economy as a whole and includes a discussion of topics like inflation and unemployment. 2Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.What to Expect from This
3、 Course1) Economics will be a new way of thinking about behavior. Since other behavioral sciences (like psychology, sociology, etc.) and business disciplines (accounting, etc.) also study behavior it isnt the only way. You should try to use economic logic to solve problems while you are in this cour
4、se - that is what the course is all about.3Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.2) There is a lot of math and graphs involved in studying economics. If you are uncomfortable with math then you need to be extra careful to make certain that you dont get behind. It isnt possible
5、 to do well in this course without using math so dont try.3) A goal of this course is to try to acquaint you with many of the topics which economists study.4Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.II. Course Schedule nPer chapter per week from chapter 1 to chapter 16, except cha
6、pter 11, 12.nThere will be small quiz at due time.nAt the end of this semester there will be a final exam.5Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.III. Assessment Plan:Assessment of your accomplishment in this course consists of classroom performance 20%) and small quiz (30%) an
7、d the final exam (50%). Classroom Performance: lecture attendance, participation in classroom activities and behavior in an agreeable manner6Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Mid-term exam and final exam : You are expected to have a mid-term exam and a final exam , both co
8、nsisting of Multiple choice, Problems and Applications .7Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.IV. Suggested Reading: nCore Textbook: nN. Gregory Mankiw, Principles of Economics, 3rd Ed., 2004 by Thomson Learning. nSupplementary Textbooks:1. Paul A. Samuelson, William D. Nordh
9、aus, Economics, 16th ed., 1998 by The McGraw-Hill Companies, Inc.8Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.2.Joseph E. Stiglitz, Carl E. Walsh, Economics, 3rd ed., Renmin University of China Press, 2005.3. Robert H. Frank, Ben S. Bernanke: Principles of Microeconomics, 3rd ed., B
10、eijing: Tsinghua University Press, 2007.4. 西方经济学西方经济学（微观部分）（微观部分）/高鸿业主编高鸿业主编， 第第3版版，中国人民大学出版社，中国人民大学出版社，2004。9Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Journals in English:n1. Econometrica （数量经济学）（数量经济学）n2. Quarterly Journal of Economics （经济学季刊杂志）（经济学季刊杂志）n3. Journal of Economic L
11、iterature （经济学文献杂志）（经济学文献杂志）n4. American Economic Review （美国经济评论）（美国经济评论）n5. Journal of Political Economy （政治经济学杂志）（政治经济学杂志）n6. Review of Economic Studies （经济研究评论）（经济研究评论）10Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.n7. Journal of Monetary Economics （货币经济学杂志）（货币经济学杂志）n8. Journal of
12、 Economic Theory （经济学理论杂志）（经济学理论杂志）n9. Games and Economic Behavior （博弈与经济行为）（博弈与经济行为）n10. Journal of Economics Perspectives （经济学展望杂志）（经济学展望杂志）n11. Journal of Econometrics （计量经济学杂志）（计量经济学杂志）11Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Journals in Chinese:n1. 经济研究经济研究n2. 管理世界管理世界n3.
13、中国社会科学中国社会科学n4. 经济学动态经济学动态n5. 世界经济世界经济n6. 经济学经济学(季刊季刊)n7. 中国人口中国人口资源与环境资源与环境n8. 中国工业经济中国工业经济n9. 国际贸易问题国际贸易问题n10. 南开管理评论南开管理评论12Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.n11. 人民日报、人民日报、经济日报、光明日报（理论版）经济日报、光明日报（理论版）n12. 经济社会体制比较经济社会体制比较n13. 经济评论经济评论n14. 经济学家经济学家n15. 经济科学经济科学n16. 中国经济
14、问题中国经济问题n17. 中国农村经济中国农村经济n18. 经济理论与经济管理经济理论与经济管理n19. 南开经济研究南开经济研究n20. 中国经济问题中国经济问题13Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.A Lecture Presentation in PowerPoint to AccompanyPrinciples of EconomicsSecond EditionbyN. Gregory MankiwPrepared by Mark P. Karscig, Department of Economi
15、cs & Finance, Central Missouri State University.14Ten Principles of EconomicsChapter 1Copyright 2001 by Harcourt, Inc.Allrightsreserved.Requestsforpermissiontomakecopiesofanypartoftheworkshouldbemailedto:PermissionsDepartment,HarcourtCollegePublishers,6277SeaHarborDrive,Orlando,Florida32887-6777.15H
16、arcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.LEARNING OBJECTIVES:By the end of this chapter, students should understand:nthat economics is about the allocation of scarce resources.nthat individuals face tradeoffs.nthe meaning of opportunity cost.16Harcourt,Inc.itemsandderiveditemscopy
17、right2001byHarcourt,Inc.nhow to use marginal reasoning when making decisions.nhow incentives affect peoples behavior.nwhy trade among people or nations can be good for everyone.nwhy markets are a good, but not perfect, way to allocate resources.nwhat determines some trends in the overall economy.17H
18、arcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Economy. . . . . . The word economy comes from a Greek word for “one who manages a household.”18Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.A household and an economy face many decisions:uWho will work?uWhat goods and how m
19、any of them should be produced?uWhat resources should be used in production?uAt what price should the goods be sold?19Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Society and Scarce Resources:The management of societys resources is important because resources are scarce.20Harcourt,In
20、c.itemsandderiveditemscopyright2001byHarcourt,Inc.Scarcity . . . . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have.21Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Economics is the study of how society manages its s
21、carce resources. Definition of Economics22Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. (Paul A. Samuelson) 23Harcourt,Inc.itemsandderiveditemscopyr
22、ight2001byHarcourt,Inc.Economics is the study of how people make choices under conditions of scarcity and of the results of those choices for society. (Robert H. Frank) 24Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Economists study. . . uHow people make decisions.uHow people interac
23、t with each other.uThe forces and trends that affect the economy as a whole.25Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Ten Principles of EconomicsPeople face tradeoffs.The cost of something is what you give up to get it.Rational people think at the margin.People respond to incent
24、ives.How People Make Decisions26Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Ten Principles of EconomicsTrade can make everyone better off.Markets are usually a good way to organize economic activity.Governments can sometimes improve economic outcomes.How People Interact27Harcourt,In
25、c.itemsandderiveditemscopyright2001byHarcourt,Inc.Ten Principles of EconomicsThe standard of living depends on a countrys production.Prices rise when the government prints too much money.Society faces a short-run tradeoff between inflation and unemployment.How the Economy as a Whole Works28Harcourt,
26、Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.1. People face tradeoffs.“There is no such thing as a free lunch!”29Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.1. People face tradeoffs.To get one thing, we usually have to give up another thing.u Guns v. butteru Food v. clothingu
27、 Leisure time v. worku Efficiency v. equityMaking decisions requires trading off one goal against another.30Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nExamples of a tradeoff include:nhow a student spends his/her time,nhow a family decides to spend its income, nhow the government s
28、pends its tax revenue, nhow regulations may protect the environment at a cost to firm owners.31Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.1. People face tradeoffs.uEfficiency means society gets the most that it can from its scarce resources.uEquity means the benefits of those resou
29、rces are distributed fairly among the members of society.A special example of a tradeoff is the tradeoff between efficiency and equity. Efficiency v. Equity32Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.2. The cost of something is what you give up to get it.Decisions require comparin
30、g costs and benefits of alternatives.uWhether to go to college or to work?uWhether to study or go out on a date?uWhether to go to class or sleep in?33Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.2. The cost of something is what you give up to get it.The opportunity cost of an item is
31、 what you give up to obtain that item.34Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nOpportunity costof the chosen item or activity is the value of the best alternative that is forgone35Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nTime is the ultimate constraintBy p
32、ursuing one activity, we cannot at the same time do something else each activity undertaken has an opportunity costnMonetary costMay be a reasonable approximation but can omit the time involved which may be substantial for some activities36Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc
33、.3. Rational people think at the margin.Marginal changes are small, incremental adjustments to an existing plan of action.People make decisions by comparing costs and benefits at the margin.37Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Case Study 1 : thinking at the marginnSuppose t
34、hat flying a 200-seat plane across the country costs the airline $100,000 which means that the average cost of each seat is $500. Suppose that the plane is minutes from departure and a passenger is willing to pay $300 for a seat. Should the airline sell the seat for $300?38Harcourt,Inc.itemsandderiv
35、editemscopyright2001byHarcourt,Inc.4. People respond to incentives.uMarginal changes in costs or benefits motivate people to respond.uThe decision to choose one alternative over another occurs when that alternatives marginal benefits exceed its marginal costs!39Harcourt,Inc.itemsandderiveditemscopyr
36、ight2001byHarcourt,Inc.nBecause people make decisions by weighing costs and benefits, their decisions may change in response to changes in costs and benefits.nSometimes policymakers fail to understand how policies may alter incentives and behavior. 40Harcourt,Inc.itemsandderiveditemscopyright2001byH
37、arcourt,Inc.Family of Marginal Concepts nMarginal Benefit (MB)nMarginal Cost (MC)nMarginal Utility (MU)nMarginal Revenue (MR)41Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Marginal Benefit & Marginal CostnMarginal benefit (MB)Change in total benefit (TB) caused by an incremental chan
38、ge in the level of the activitynMarginal cost (MC)Change in total cost (TC) caused by an incremental change in the level of the activity42Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Marginal Benefit & Marginal Cost43Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Net Be
39、nefitnNet Benefit (NB)Difference between total benefit (TB) and total cost (TC) for the activityNB = TB TC44Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Using Marginal Analysis to Find Optimal Activity LevelsnIf marginal benefit marginal costActivity should be increased to reach high
40、est net benefitnIf marginal cost marginal benefitActivity should be decreased to reach highest net benefitnOptimal level of activityWhen no further increases in net benefit are possibleOccurs when MB = MC45Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Case Study 2: Average Cost and Ma
41、rginal CostnProfessor Kston Banifoot, a prominent supporter of the National Aeronautics and Space Administrations (NASA) space shuttle program, estimated that the gains from the program are currently $24 billion per year (an average of $6 billion per launch). And that its costs are $20 billion per y
42、ear (an average of $5 billion per launch). On the basis of these estimates, Professor Banifoot testified before Congress that NASA should definitely expand the space shuttle program. 46Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nSuppose, for the sake of discussion, that the benefit
43、 of an additional launch is in fact the same as the average benefit per launch thus far, $6 billion, should Congress follow Professor Banifoots advice? (The total costs and average costs per launch are as the following table.)nIf the marginal benefit of each launch had not been $6 billion but $9 bil
44、lion, how many shuttles should NASA have launched?47Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Table 1 (Case Study 2):How Total cost Varies with the Number of LaunchesNumber of launchesTotal cost($ billion)Average cost ($ billion/launch)000133273.5312442055326.448Harcourt,Inc.items
45、andderiveditemscopyright2001byHarcourt,Inc.Solution:nTo discover whether expanding the program makes economic sense, we must compare the marginal cost of a launch to its marginal benefit.nNASA should continue to launch shuttles as long as the marginal benefit of the program exceeds its marginal cost
46、. In this example, the marginal benefit is constant at $6 billion per launch, regardless of the number of shuttles launched. NASA should thus keep launching shuttles as long as the marginal cost per launch is less than or equal to $6 billion. According to the data of the following tables, NASA shoul
47、d launch three shuttles.49Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.Table 2 (Case Study 2):How Marginal cost Varies with the Number of Launches50Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nEconomists use the term marginal changes to describe small incremental adj
48、ustments to an existing plan of action. nKeep in mind that “margin” means “edge,” so marginal changes are adjustments around the edges of what you are doing.nIn many situations, people make the best decisions by thinking at the margin.51Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.LA
49、 Laker basketball star Kobe Bryant chose to skip college and go straight to the NBA from high school when offered a $10 million contract.4. People respond to incentives.52Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.5. Trade can make everyone better off.uPeople gain from their abilit
50、y to trade with one another.uCompetition results in gains from trading.uTrade allows people to specialize in what they do best.53Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.6. Markets are usually a good way to organize economic activity.uIn a market economy, households decide what t
51、o buy and who to work for.uFirms decide who to hire and what to produce. 54Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc. Market Economy: an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and serv
52、ices.Market prices reflect both the value of a product to consumers and the cost of the resources used to produce it. Therefore, decisions to buy or produce goods and services are made based on the cost to society of providing them.55Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.6. Ma
53、rkets are usually a good way to organize economic activity.Adam Smith made the observation that households and firms interacting in markets act as if guided by an “invisible hand.”56Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.The Invisible HandnAdam Smith proclaimed the principle of
54、 the “invisible hand”. nThis principle holds that, in selfishly pursuing only his or her personal good, every individual is led, as if by an invisible hand, to achieve the best good for all.Smith held that in this best of all possible worlds, government interference with market competition is almost
55、 certain to be injurious.57Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nIn The Wealth of Nations (1776), Smith saw the harmony between private and public interest:nEvery individual endeavors to employ his capital so that its produce may be of greatest value. He generally neither int
56、ents to promote the public interest, nor knows how much he is promoting it. He intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of society more e
57、ffectually than when he really intends to promote it.58Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.nNow we recognize the scope and realistic limitations of Adam Smiths invisible-hand doctrine.nThere are “market failures” and the markets do not always lead to the most efficient outco
58、me. One set of market failures concerns monopolies and other forms of imperfect competition.59Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc. A second failure of the invisible hand comes when there are spillovers or externalities outside the marketplacePositive externalities such as sc
59、ientific discoveriesNegative spillovers such as pollution A final market failure comes when the income distribution is politically or ethically unacceptable.60Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.When any of these elements occur, Adam Smiths invisible-hand doctrine breaks dow
60、n and government may want to step in to mend the flawed invisible hand. 61Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.6. Markets are usually a good way to organize economic activity.uBecausehouseholdsandfirmslookatpriceswhendecidingwhattobuyandsell,theyunknowinglytakeintoaccountthes
61、ocialcostsoftheiractions.uAsaresult,pricesguidedecisionmakerstoreachoutcomesthattendtomaximizethewelfareofsocietyasawhole.62Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.7. Governments can sometimes improve market outcomes.When the market fails (breaks down) government can intervene t
62、o promote efficiency and equity.63Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.7. Governments can sometimes improve market outcomes.Market failure occurs when the market fails to allocate resources efficiently.64Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.7. Governme
63、nts can sometimes improve market outcomes.Market failure may be caused by an externality, which is the impact of one person or firms actions on the well-being of a bystander.65Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.7. Governments can sometimes improve market outcomes.Market fai
64、lure may also be caused by market power, which is the ability of a single person or firm to unduly influence market prices. 66Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.8. The standard of living depends on a countrys production.Standard of living may be measured in different ways:u
65、By comparing personal incomes.uBy comparing the total market value of a nations production.67Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.8. The standard of living depends on a countrys production.Almost all variations in living standards are explained by differences in countries pro
66、ductivities.68Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.8. The standard of living depends on a countrys production.Productivity is the amount of goods and services produced from each hour of a workers time.Higher productivity Higher standard of living69Harcourt,Inc.itemsandderived
67、itemscopyright2001byHarcourt,Inc.9. Prices rise when the government prints too much money.Inflation is an increase in the overall level of prices in the economy.uOne cause of inflation is the growth in the quantity of money.uWhen the government creates large quantities of money, the value of the mon
68、ey falls.70Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.10. Society faces a short-run tradeoff between inflation and unemployment.The Phillips Curve illustrates the tradeoff between inflation and unemployment:Inflation UnemploymentIts a short-run tradeoff!71Harcourt,Inc.itemsandderiv
69、editemscopyright2001byHarcourt,Inc.The four principles of economic decision making are: (1) people face tradeoffs; (2) the cost of something is what you give up to get it; (3) rational people think at the margin; and (4) people respond to incentives. 72Harcourt,Inc.itemsandderiveditemscopyright2001b
70、yHarcourt,Inc.The three principles concerning economic interactions are: (1) trade can make everyone better off; (2) markets are usually a good way to organize economic activity; and (3) governments can sometimes improve market outcomes. 73Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc
71、.The three principles that describe how the economy as a whole works are: (1) a countrys standard of living depends on its ability to produce goods and services; (2) prices rise when the government prints too much money; and (3) society faces a short-run tradeoff between inflation and unemployment.
72、74Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.SummaryuWhen individuals make decisions, they face tradeoffs.uRational people make decisions by comparing marginal costs and marginal benefits. 75Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.SummaryuPeople can benefit by
73、trading with each other.uMarkets are usually a good way of coordinating trades.uGovernment can potentially improve market outcomes.76Harcourt,Inc.itemsandderiveditemscopyright2001byHarcourt,Inc.SummaryuA countrys productivity determines its living standards.uSociety faces a short-run tradeoff between inflation and unemployment. 77
