Introduction to Micro-Economics

AS/ECON1000 3.0
Sections C
MWF, 12:30 – 1:30
Course Outline:
http://dept.econ.yorku.ca
Web site:
www.noordeh.pageout.net
 Contact Information
Course Director: Professor A. Noordeh

Office 1078 Vari Hall (VH)

Tel: (416) 736-2100 Ext. 33344
email: anoordeh@econ.yorku.ca
Office Hours: MW 1:30 – 2:30
General Info about Economic Courses/Programs:
Department of Economics: 1144 Vari Hall
Tel: (416) 736 – 5322
 Teaching Assistants

TBA
Office: 1098 Vari Hall
Office Hours: M – F 8:30 – 4:30
 Student Evaluation
Option 1:
– Midterm Exam (40%)
– Final Exam (60%)

Option 2:
– Online Assignments (20%) – Requires “APLIA” online program
(Approx. $35 CAN)
– Midterm Exam (30%)
– Final Exam (50%) – Covers the entire term’s work

Midterm exam date: Monday October 22, 2007

Final exam date: TBA
 Assignments
Register with “APLIA”:
http://www.aplia.com
Use Course Key:
W7S2-5ZUU-VYE2
Payment grace period ends: Sept. 25
Assignment due dates
• Assignment 1: October 22, 07
• Assignment 2: November 30, 07
 Other Important Dates

Sep. 20: Last date to enrol in the course

without the permission of the instructor
Oct. 5: Last date to enrol in the course with
the permission of the instructor
Nov. 9: Last date to drop the course without
receiving a grade
 TEXT:
ECONOMICS
Canada in the Global Environment
Sixth Canadian Edition
by
Michael Parkin & Robin Bade
Publisher:
Pearson Addison Wesley
 Study Guide
by
Avi J. Cohen & Harvey B. King
For
MICROECONOMICS
Canada in the Global Environment
Sixth Canadian Edition
 Class/Exam Rules

Email Policy
Cell phones - OFF
Being on time (imperative)
No electronic device of any kind is allowed
during the examination except a simple
calculator (e.g. cell phones, pocket PCs,
memory pens, etc.)
 Reading/Homework
for
September 7, 10 & 12, 2007

Reading: Text - Chs. 1, 2 & Appendix to Ch. 1

Practice Exercises: All review Quizzes & Odd-
numbered problems
Study Guide: Ch.1 & 2 and Appendix to Ch. 1
Key Concepts & all Multiple Choice questions
The Economic Problem
Chapter 2
Objectives
To understand
•Production Possibilities Frontier
•Opportunity cost
•Efficient allocation of resources
•Current Choices vs. Future Possibilities
•Specialization and trade
•Production possibilities Expansion

2-12
Production Possibilities and
Opportunity Cost

2-13
 Production Possibilities and
Opportunity Cost
Production Efficiency:
If we cannot produce
more of one good
without producing less
of some other good.

2-14
Production Possibilities and
Opportunity Cost
• PPF shows: Scarcity,
Choice (Trade-off
along the PPF ) &
Opportunity Cost.

2-15
Production Possibilities and
Opportunity Cost – PPF Concavity

• The outward bow of

the PPF (concavity)
means that as the
quantity produced of
each good increases,
so does its
opportunity cost.

2-16
Using Resources Efficiently

– Allocative Efficiency
• Marginal Benefit & Marginal Cost analysis

MC = MB

2-17
Using Resources Efficiently

2-18
Using Resources Efficiently

Marginal Cost
Curve (MC)

2-19
 Using Resources Efficiently

• Marginal Benefit (MB)

• The marginal benefit
curve shows the
relationship between the
marginal benefit of a
good and the quantity of
that good consumed.
• (principle of decreasing
marginal benefit).

2-20
Using Resources Efficiently
– Allocative Efficiency
– The point of allocative
efficiency is the point
on the PPF at which
marginal benefit
equals marginal cost.

2-21
Economic Growth

– Economic Growth: Definition

– Two key factors influence economic growth:
– Technological change
– Capital accumulation

2-22
Economic Growth

• The Cost of Economic Growth

– To use resources in research and
development and to produce new capital, we
must decrease our production of consumption
goods and services.

2-23
Economic Growth

Biased vs. Neutral

Economic Growth

2-24
Gains From Trade
• Comparative Advantage
– A person has a comparative advantage in
an activity if that person can perform the
activity at a lower opportunity cost than
anyone else.

2-25
2-26
2-27
2-28
Gains From Trade
– If Tom and Nancy produce discs and cases independently,
they can produce 1,000 CD units each (2,000 total).
– But because Tom’s opportunity cost of producing discs is
less than Nancy’s, he has a comparative advantage in disc
production.
– And because Nancy’s opportunity cost of cases is less than
Tom’s, she has a comparative advantage at producing
cases.
– Tom and Nancy can both gain from specialization and
trade.

2-29
2-30
2-31
The Market Economy
– Trade is organized using two key social institutions:
– Property rights
– Markets
• Property Rights
– Property rights are the social arrangements that
govern ownership, use, and disposal of resources,
goods or services.
• Markets
– A market is any arrangement that enables buyers
and sellers to get information and do business with
each other.

2-32
The Market Economy

Circular Flows in the Market Economy

A circular flow diagram illustrates how households and
firms interact in goods markets and factor markets.

2-33
2-34