SPSS Tutorial AEB 37 / AE 802 Marketing Research Methods Week 5.
AE Lesson 1 Week 1
Transcript of AE Lesson 1 Week 1
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Introduction to Economics
By Esther Tiemes
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Lecturer Info
Email: [email protected]
Twitter: twitter.com/econpopculture
Blog: learningeconomics.tumble.comPhone: (work) 5889946 ext.236
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Course Info
Course code: AE
Name: Introduction to economics
Credits: 4 ECTs (4*28hours) Literature: Selected Chapters of
Principles of Economics (see syllabus)+ Handouts Slides
Ua.edu20.org: Course 53079
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Study load: 4 ECTs = 112 hours
Contact hours: 42 Home study:
Study Literature 2hrs per week 28
Homework 1 hr per week 14 Tests and Exams
Review Literature 12 Final Exam 2
Re-Exam 2 Voortgangstoets 1
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Grading
100% exam (MC and Open Question)
0.5 Bonuspoint to be earned by
At least 11 out of 14 classed attendedAND
Active Participation in class AND
Homework has been made
Voortgangstoetsbonus
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Give me one reason to stay here- and I'll turn right back around
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What do Economists do?
Economist study the choices
that `make that result fromscarcity
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Scarcity
The condition that we have limitedresources and therefore cannot fulfillall our needs and wants.
A scarce resource is a resource ofwhich we do not have enough to fulfillall our needs and wants
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PEOPLE FACE TRADE-OFFSPrinciple #1
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THE COST OF SOMETHING ISWHAT YOU GIVE UP TO GET ITPrinciple #2
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Example1: Field of Dreams
What is the trade-off that the maincharacter in this movie faces/faced?
Due to which scarcity does he face thistrade-off
Whats the opportunity cost of hischoice?
http://youtu.be/HQv0WWhoZnIhttp://youtu.be/HQv0WWhoZnI -
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Example 2:
Which person below thinks like an economist? Why? If we build a dam,
well have better flood
control and cheaperelectricity. If we dont,then well experienceoccasional flooding,and electricity will be
more expensive.
If we build the dam,well have flood control
and cheaperelectricity. But the$100 million to buildthe dam could be usedinstead to build two
new high schools.
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Example 3
Suppose a woman is walking alongdown the street when she sees a dimeon the sidewalk. Should she pick it up?
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But suppose she isMadonna and she'shurrying to a
recording studiowhere a symphonyorchestra is waiting toperform with her.
Should she pick it up?Why/why not?
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Example 4
Ernesto is trying to decide whetherto attend college and has determinedthe money cost of attending college for
one year.
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Money Cost of a Year of College Tuition: $1,000
Books and school supplies: 2,000Room and board: 10,000Transportation: 1,000Miscellaneous expenses: 3,000
__________________________________ Total money cost: $17,000
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Calculating the OpportunityCost
1. What alternative opportunities are there?Working at drive-in, working at MacDonalds,become unemployed
2. Which is the best of these alternativeopportunities? Working at the drive-in
3. What would he gain if he selected my bestalternative opportunity instead of the choicehes considering? If Ernesto worked, he
wouldnt have to pay for tuition, books, orschool supplies. He also would earn$10,000 during the year that she worked.
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Opportunity Cost (of going to college)
Tuition: $ 1,000Books and school supplies: 2,000Foregone wages from working: 10,000_____________________________________
Total opportunity cost: $13,000
Benefit of going to college: higher futureearnings, new friends, and a betterunderstanding of our world
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RATIONAL PEOPLE THINK ATTHE MARGINPrinciple #3
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Rational People
People who systematically andpurposefully do the best theycan to achieve their objectives
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Marginal Changes
Small incremental adjustmentsto a plan of action
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Sunk Costs
Costs that have been made inthe past and that cannot be
recuperated
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Example 1: Bad Movie
Q: Imagine you pay $10 to go to a movie. Youthen go to the movie, but it turns out that the
jokes are very boring and you are notenjoying yourself. You cannot get a refund of
the $10. Would you:
A. stay and watch the movie till the end, becauseyou have already paid $10? Or
B. would you leave the theater and go get some
ice-cream?
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Example 2: Business Investment
$20 million has been spent on building apower plant; the value at present is zerobecause it is incomplete (and no sale or
recovery is feasible). The plant can becompleted for an additional $10 million,or abandoned and a different but equallyvaluable facility built for $5 million.
What would a rational economic agent doaccording to an economist?
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Example 3: Seinfeld
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Questions
What would you have done if you wereElaine.
Would an economist call Elaine rational?
What are the sunk costs in this story? What are the opportunity cost of eating
the 24th sandwich?
What are the marginal costs and what arethe marginal benefits of eating the 24thsandwich
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PEOPLE RESPOND TOINCENTIVESPrinciple #4
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Incentive
Something that induces aperson to act
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Example: Money on the floor
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Give me one Reason
Questions:
What is so scarce that it forces her to make adecision
What do you think the (marginal) opportunitycosts are of staying for this person?
What do you think the marginal benefits areof her staying?
Do you think sunk costs play an importantfactor in her decision-making?
What do incentives have to do with this song?
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Field of Dreams
What is the scarce resource in this scene? What is the decision he has made? What are according to you the marginal cost of his
decision to turn the cornfield into a baseball field. What are according to you the marginal cost of his
decision to turn the cornfield into a baseball field? It appears that the marginal benefits are larger than the
marginal costs of building a baseball field according tothe main character in the movie. Explain why.
What are the factors of production used to finish the
field?
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Brown Bag Economics
http://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economics
Do you agree with the writersanalysis?
http://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economicshttp://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economicshttp://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economicshttp://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economicshttp://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economicshttp://marketplace.publicradio.org/display/web/2006/06/05/brown_bag_economics -
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RECAP