Sec 1a

Section 1. Microfoundations: Concepts for Making Consumer Decisions What is the difference between microeconomics and macroeconomics?

Microeconomics: focuses on the behavior of individual consumers, households, & businesses. Examples: 1. Why do some couples choose to have three children while others elect to have none? 2. Why do some families carry life insurance while others do not? 3. Why do some families save to purchase major appliances while others buy them on credit?

Microeconomic Principles (i.e., proverbs) We’ll Cover ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Proverb #1: Families are a bit like firms

What’s involved in cost-benefit analyses? ,[object Object],[object Object],[object Object],[object Object]

The central question is… ,[object Object]

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Proverb #2: Make Sure “The Price is Right” ,[object Object],[object Object]

Nominal Price ,[object Object],[object Object],[object Object]

[object Object],Proverb #3: Time is money Year # Passenger-Miles* Real Price 1985 346 1.04 1990 362 1.14 1993 403 1.24 * In billions. Source: Statistical Abstract of the U.S. 1997.

The Time Costs of Preparing Dinner

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Example: Time Costs of Preparing Dinner - Friends are coming to town for the weekend. Should you take them out to dinner or cook for them at home?

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Example: Travel Trade-Offs - Should you and your two children fly or drive to Denver for your sister’s wedding?

So, how can do we measure the value of time? ,[object Object],[object Object],[object Object],[object Object]

Opportunity Cost of Coming to Class ,[object Object],[object Object],[object Object],[object Object],[object Object]

Opportunity Cost of Getting an ‘A’ in This Class ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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So, what are the costs of your time (I.e. time costs)? Weekly earnings in 2009 Total $738 Men 16-24 $448 24+ $870 Women 16-24 $415 24+ $691 Source: Bureau of Labor Statistics, First Quarter Earning 2006

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],So What????

Sec 1a

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Sec 1a