Controversy: Who is Poor End of Lesson I.1

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Controversy: Who is Poor End of Lesson I.1

Carlisle, Ken, Morning Drive Host has reference to this Academic Journal, PHwiki organized this Journal Deep Thought BA 210 Lesson I.1 Introduction I can picture in my mind a world without war, a world without hate. And I can picture us attacking that world, because they’d never expect it. — by Jack H in addition to ey. Acknowledgements Much of the course content is adapted from the textbook Microeconomics by Paul Krugman, Nobel Laureate ( in addition to as long as mer teacher of Jon Burke), second edition, published by Worth Publishers © 2009. The PowerPoint slides as long as the lessons are your primary text. Read the Krugman text as long as more details as you see fit. Welcome to BA 210 Introduction to Microeconomics BA 210 Lesson I.1 Introduction Getting acquainted What is Microeconomics Microeconomics is a list of assumptions in addition to their consequences that helps consumers make satisfying choices, helps managers make profitable decisions, in addition to helps governments make effective public policies. Economists follow the path of pure logic, in addition to leave passions in addition to emotions as long as the people they try to help. BA 210 Lesson I.1 Introduction Welcome to BA 210 Introduction to Microeconomics

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BA 210 Lesson I.1 Introduction Getting started Read in addition to bookmark the online course syllabus. http://faculty.pepperdine.edu/jburke2/ba210/index.htm It serves as a contract specifying our obligations to each other. (You may need Internet Explorer.) In particular, note: High School Algebra is a prerequisite, so review as needed. Be as long as e each class meeting, download in addition to read the PowerPoint lesson, as presented under the “Schedule” link. After each class meeting, answer any assigned homework questions. And answer some of the review questions at the end of the PowerPoint lesson. If you get stuck on some question, review as needed the PowerPoint lesson or the Krugman text or my answers. Welcome to BA 210 Introduction to Microeconomics Lesson Overview BA 210 Lesson I.1 Introduction Chapter 1 First Principles You may dislike Microeconomics, if What is Theory Microeconomic Assumptions Testing Selfishness Revealed Preference Controversy: Who is poor Summary Review Questions You may dislike Microeconomics, if BA 210 Lesson I.1 Introduction You may dislike Microeconomics, if You hold to economic dogma. Many lifelong Democrats in addition to many lifelong Republicans hold established beliefs about public policies that are not to disputed, doubted, or diverged from. You are a political hack personally identified with a political party, in addition to are driven more by success of the party than by personal conviction about the effectiveness of a particular public policy. Your concern as long as public policy is driven more by self interest than by personal conviction.

What is Theory BA 210 Lesson I.1 Introduction Theory helps you underst in addition to facts. Economic theorizing is often attempted, but is not always logical. For instance, you might argue the government should re as long as m health care because of the fact that poor people get worse care than rich people. That poor people get worse care is a fact; no theory is needed. But when you conclude that health care should be re as long as med, you theorize. What is Theory BA 210 Lesson I.1 Introduction Common arguments as long as re as long as ming health care implicitly assume some type of equality among people is socially desirable. But what should be equal For example, it may seem reasonable to assume that equality of happiness among people is socially desirable. However, it does not seem reasonable that equality of consumption is socially desirable, as if Barack should eat just as many bananas as Bill. So if we treat medical care like bananas, it may not seem reasonable to assume that equality of medical care is socially desirable. What is Theory BA 210 Lesson I.1 Introduction Put another way, suppose there were equal health care between rich in addition to poor. What would happen How would you respond if Bill Gates offered a million dollars as long as some of your care For example, would you sell him your place in line as long as a blood test to set a broken bone as long as an artificial heart Is equal health care with the rich the best thing you can give the poor What would the poor prefer

Microeconomic Assumptions BA 210 Lesson I.1 Introduction Microeconomic Theory is founded on three Assumptions. Those assumptions are a checklist as long as when microeconomics can help consumers make satisfying choices, help managers make profitable decisions, in addition to help governments make effective public policies. BA 210 Lesson I.1 Introduction To make precise assumptions, we must first speak the same language. In price theory, words like “commodity” in addition to “utility” take more precise definitions than in common usage. Microeconomic Assumptions BA 210 Lesson I.1 Introduction The Definition of Commodities in addition to Goods The basic object in economic theory is a commodity, defined to be anything that can be measured in addition to traded between people. Commodities can be physical goods, like apples or Cuban cigars; or services, like haircuts or medical care. Some commodities are undesirable, like smog, but their opposites, like clean air, are desirable. This class mostly considers desirable commodities, which we also call goods. Name some commodities. Are kids commodities Is time a commodity How do you measure time trade time Microeconomic Assumptions

BA 210 Lesson I.1 Introduction I don’t care too much as long as money, money can’t buy me love — The Beatles. Assumption 1: Anything that affects happiness or satisfaction is a commodity. Economics thus considers how people’s happiness is effected by cars, kids, in addition to free time. But economics does not directly consider whether kids are loved by their parents, since love is not a commodity. Microeconomic Assumptions BA 210 Lesson I.1 Introduction Don’t confuse assumptions with presumptions. You “presume” when you believe a proposition is a fact; you “assume” when you accept a proposition as a fact as long as a particular purpose. Microeconomists assume anything that affects happiness is a commodity because the microeconomic way of logical thinking does not yield helpful conclusions about non-commodities like love. If you are love sick or sick of love, see a psychologist, not a microeconomist. Microeconomic Assumptions BA 210 Lesson I.1 Introduction The Definition of Consumption in addition to Consumer Consumption is when a commodity is used; a consumer does the consumption. A consumer can be an individual, or a household, or a family dynasty (Kennedy’s), or an institution (Pepperdine University), or a country (United States), or all humankind. The default definition of a consumer is a household, which is a person or a group of people living in the same residence. Microeconomic Assumptions

BA 210 Lesson I.1 Introduction The Definition of Utility Through consumption, a consumer generates happiness in addition to satisfies his needs, wants, in addition to desires. The happiness or satisfaction generated is measured by the quantity of utility. The definition of utility separates microeconomics from psychology, which treats needs, wants, in addition to desires differently. Combining needs, wants, in addition to desires simplifies microeconomics. If your job meets your physical needs but leaves you feeling empty because you have not realized your own maximum potential, see a psychologist, not a microeconomist. Microeconomic Assumptions BA 210 Lesson I.1 Introduction The best things in life are free But you can give them to the birds in addition to bees I want money — The Flying Lizards. http://www.stlyrics.com/lyrics/empirerecords/moneythatswhatiwant.htm Assumption 2: Individual households are perfectly selfish or self-interested, concerned only with the utility they get from their own consumption of commodities. Parents can care about kids within their own household, but not about kids in other households. Is that the way households should be Is that the way most households are Microeconomic Assumptions BA 210 Lesson I.1 Introduction The assumption of perfect selfishness might, at first, seem harsh in addition to extreme. — Would you care if your neighbor’s car were stolen But while selfishness rules out benevolence (like concern as long as the poor), it also rules out malevolence. — Would you care if your neighbor just got a car that is twice as good as yours Thus, the assumption of perfect selfishness takes a middle ground, with real people on either side. Perhaps, the approximation errors from ignoring benevolence offset the approximation errors from ignoring malevolence. Microeconomic Assumptions

BA 210 Lesson I.1 Introduction “nosce te ipsum” (know yourself) — The Oracle from The Matrix Assumption 3: People are rational. They are perfect calculators in addition to flawless followers of those choices that are in their own best interests. Rationality is a debatable assumption: Do you know what makes you happy Ever made a bad choice Do you know exactly how much money you have in your pocket Or how much you could get from your parents Microeconomic Assumptions Testing Selfishness BA 210 Lesson I.1 Introduction To test the assumption of perfect selfishness, ask: do citizens vote in their self interest Which American political party favors the rich Are Republicans richer than Democrats Testing Selfishness BA 210 Lesson I.1 Introduction Extra Credit: Take a survey of the selfishness of at least 10 r in addition to om people. Ask what percent of their salary that they donated to charity this year or that they gave to someone outside their household or family. Ignore answers like “I only gave 1 percent, but I would like to have given more” or “next year, I plan to give more”. It is important you measure the selfishness of an entire household or family. Parents giving to children does not count. It is also important you conduct a r in addition to om survey. Do not, as long as example, go to church in addition to pole missionaries or pole the Amish. Based on your survey, is the assumption of perfect selfishness realistic If not 100 percent true, is the assumption of perfect selfishness at least 95 percent true

Revealed Preference BA 210 Lesson I.1 Introduction Are Americans happier than Italians Are Americans happier today than 30 years ago Of course, any answer is debatable: some may believe that Americans are inherently different from Italians in addition to so cannot be compared. Microeconomics aims to make comparisons through the assumption that commodities are all that matter. Namely, to determine which country or which year is better, compare the consumption of commodities. Even using microeconomics, however, such comparisons may be hard. For example, while Americans have bigger houses than Italians, they may consume less (quality) food. So we need to know whether extra housing is worth sacrificing food. Likewise, while houses are larger today than 30 years ago, there may be less leisure time. The theory of revealed preferences helps make such hard consumption comparisons. The key is to ask whether one consumption item or bundle of items (like 1500 square feet of housing in addition to 3 hours of leisure) was available when the other consumption bundle (like 1400 square feet of housing in addition to 4 hours of leisure) was chosen; if so, then the chosen bundle is preferred. Revealed Preference BA 210 Lesson I.1 Introduction Question: Are Americans happier than Italians Consider typical monthly consumption: Revealed Preference BA 210 Lesson I.1 Introduction Answer: Typical Americans consumers spend 1 × 1500 + 2 × 100 = 1700 dollars with which they could af as long as d Italian consumption, since it costs only 1 × 800 + 2 × 200 = 1200 dollars. Conclusion: Americans are happier. Note: Italians cannot af as long as d American consumption. Typical Italian consumers spend 2×800 + 1×200 = 1800 euros, but American consumption would cost 2×1500 + 1×100 = 3100 euros

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Revealed Preference BA 210 Lesson I.1 Introduction Question: Are Americans happier today than 30 years ago Consider typical monthly consumption: Revealed Preference BA 210 Lesson I.1 Introduction Answer: Today’s consumers spend 1 × 1500 + 2 × 100 + 30 × 2 = 1760 dollars with which they cannot af as long as d the consumption of 30 years ago, since it would cost (at today’s prices) 1 × 1400 + 2 × 150 + 30 × 3 = 1790 dollars. 30-years-ago consumers spend (at prices from 30 years ago) 2 × 1400 + 1 × 150 + 30 × 3 = 3040 dollars with which they cannot af as long as d the consumption of today’s consumers, since it would cost (at prices from 30 years ago) 2 × 1500 + 1 × 100 + 30 × 2 = 3160 dollars. Revealed preference is inconclusive in this case. Controversy: Who is Poor BA 210 Lesson I.1 Introduction Controversy: Who is Poor

Controversy: Who is Poor BA 210 Lesson I.1 Introduction Controversy: Who is Poor The st in addition to ard definition of “poor” in the U.S increases with the size of a family. Controversy: Who is Poor BA 210 Lesson I.1 Introduction In particular, two adults are “poor” if their yearly income is $14,570 or less. Make sense Controversy: Who is Poor BA 210 Lesson I.1 Introduction Question: Compare two families. A small family of two adults with an income of $15,000 per year; they are not considered “poor”. A big family of two adults in addition to 3 small kids with an income of $16,220; they are considered “poor”. Is the “poor” big family happier than the non-“poor” small family

End of Lesson I.1 BA 210 Lesson I.1 Introduction BA 210 Introduction to Microeconomics

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