alright folks welcome to a semester in economics and what we're gonna do in this very first lesson is we are going to define economics and try to get an understanding of what it is exactly this subject that we're learning ok so what you should have a notebook in front of you or some paper so you can take notes and I recommend that you write down everything that I write down up here on the board in your notes so that you can study and add a few extra notes of things that I say or maybe some things that will trigger memories while you're while you're learning this stuff ok all right so what is economics well I have my own definition there's probably several definitions out there I'm sure there are plenty of textbooks that have definitions of economics well there's one in particular that I like to work from and I'm gonna give you that definition right now and after I give you that definition so we're gonna say economics what is economics all right after I give you my definition I'm gonna break down the definition into four main pieces so that you can have a better understanding of how we're gonna focus on learning this semester okay so here's my definition of economics to me economics is the scientific study of how individuals that's that's like people right individual people organizations organizations so that's like businesses or maybe government organizations or not-for-profit organizations you know you know groups of people who come together to either make a profit or or achieve some kind of goal or let's say or societies now a society is like an entire country or an entire city or an entire state okay change that to societies or societies deal with the problem of scarcity scarcity okay that's SCA our city2 t that word right there scarcity that is the main word in economics that is the most important word in economics if I were to give you a much simpler definition of economics I would just simply say it is the study of scarcity and I'm going to talk about scarcity in just a few minutes so there are four main elements of this definition the first thing I want to tell you is that economics itself is scientific that it focuses on individuals organizations and societies so that's its own one category economics has to do with how these these groups or individuals how they deal with now the idea of dealing with is the idea of making a decision when you want to deal with something you know and when you get a flat tire you have to deal with that flat tire and what that means is to make decisions about how to handle that flat tire so dealing with is the idea of decision making having to make a decision a decision about what well a decision about the fact that you are facing the problem of scarcity you as an individual or plate facing the problem of scarcity or an organization is facing the problem of scarcity or an entire society a country or a state or a city is facing the problem of scarcity and like I said I'm gonna define scarcity in just a little bit okay so here are four the four things we're gonna focus on is economics as scientific economics as focusing on individuals organizations and societies economics as dealing with decision making and economics as handling the problem of scarcity so in order to do that what I want you to do right now is I want you to on your notes in your paper I'm gonna break up the board into four quadrants like this four quadrants and I think you should also break up your notes into four quadrants and we're gonna put each one of these subjects in each one of these quadrants so economics is scientific so we're gonna talk about what that means economics is concerned with individuals and organizations or firms and society's whole large groups of individuals okay that economics focuses on dealing with deal with what does it mean to deal with something okay and then lastly we have the problem of scarcity the problem of scarcity okay so we're gonna take these one at a time in the order that they are in the definition okay so economics is scientific all right so economics is a science there are scientific journals devoted to economics there are people researchers people who get paid lots of money well they probably don't get paid as much they want to get paid but nonetheless there are people who get paid money just to do research on economics research on the problem of scarcity research on individuals organizations and societies and how they deal with the problem of scarcity and because economics is scientific there are certain things that go along with all science and those two of those things that we're going to focus on we're not gonna do all of science but the two main things I want you to understand is that in science when we approach a subject in science we have to make assumptions and we have to draw conclusions we make assumptions and we draw conclusions now I want to clarify something here and that is this class is a principles of economics class this is not some masters or PhD level class where we're gonna dig very deep into the research of economics what you're supposed to be learning in this class are the basic foundational fundamental principles of economics and that's what I'm gonna focus on so here's what I'm going to do when we talk about these assumptions and conclusions especially the assumptions I want you to understand that the assumptions that we're gonna use in this economics class might not be the kinds of assumptions that would be used in a much higher level economics class so if you decide that you're gonna someday get a masters or a PhD in economics you might find out something you might learn something in that economics class and think back to this class and say wow professor Ryan was wrong what you have to understand is that the assumptions that we're gonna make are important when you're at the beginning stages of learning economics okay so I'm warning you that what were some of the things that we're gonna learn throughout this semester some of the things that I'm gonna teach you are really only foundational principles but when you get to higher levels of economics oftentimes we relax or eliminate those foundational concepts and augment them into something much much more detailed or much larger or much grander okay so I'm warning you in advance this is a principles class you are learning the basics of economics okay all right so one of the basic assumptions - well - or I'm gonna give you two basic assumptions in economics the first one is called the ceteris that's CET ER is paribus that's P a are I us that's the ceteris paribus assumption I'm gonna put quote marks around it what does ceteris paribus mean setter ceteris paribus basically means to examine one variable by not changing any of the other variables you are holding everything else constant so that you can isolate the effects of a single variable on some other phenomenon okay so ceteris paribus says that we're isolating all other variables so that we can examine one variable that's changing because here's what's gonna happen in this class is I'm gonna say something like hey you know when things are cheaper people buy more of it and then you're gonna say well not always sometimes when things are cheaper people don't want them at all and I'm gonna say you know what you're right sometimes things are so cheap that people don't want them at all but I'm using the ceteris paribus assumption we're gonna assume that it's the kind of product that everybody wants and so now if it's a product that everybody wants and the price goes down people are gonna buy more of it because they do want it we're going to assume that it is something that people want so for example if the price of garbage goes down people may say no I don't want any more garbage I'm trying to get rid of my garbage well yes I agree with you but if we're talking about something normal like a cheeseburger or french fries or a car then we can assume ceteris paribus that when the price goes down that people will buy more of it okay so that's our first assumption in economics is the ceteris paribus assumption the second assumption what is the second assumption oh the second assumption is rationality rationality okay now this is a really really we got to be very flexible with this rationality assumption but we're still going to we're still going to you use this rationality assumption in this principles class here's what the rationality assumption says the rationality assumption says that people in general are rational decision makers meaning if you give them a choice of whether they can have $20 or $30 that they will choose $30 every single time and you might say to yourself oh there must be some kind of catch no I'm telling you there's no catch your choices are $20 or $30 which one do you want everything else is the same and then obviously the rational person is gonna say well I'd rather have more money than less money so I'm gonna take $30 yes exactly we're gonna assume that you are a rational person that I am a rational person that I want more good stuff and I want less bad stuff in my life that is rationality okay so that's the second assumption and because economics is scientific we have to have we have to start somewhere and where we're going to start is that we're only going to look at one variable at a time and then also we're gonna assume that people are making rational decisions that they're not insane that they are not out to get worse things for themselves and less better things no that doesn't make any sense we're gonna assume that the people that the individuals the organizations and societies that we're dealing with are rational okay all right now let's move on to conclusions oftentimes what we do in economics is after we learn something new or after we understand something we then draw a conclusion right and here's how it goes for example let's say that um people are spending more of their money on one kind of cereal people are spending more money on Lucky Charms than they are spending on Cheerios and so we might draw a conclusion while people are buying more Lucky Charms than Cheerios and ceteris paribus they're both they both have the same price then people must like here I'm going to draw a conclusion now well I'm now going to that people prefer Lucky Charms over Cheerios now that may not be true in reality but in my example that is a conclusion and oftentimes when we draw conclusions in economics there are two kinds of conclusions that we can draw we can draw or we can come to conclusions that are what we call positive conclusion conclusions or normative normative conclusions and what we're going to try and focus on in this class is we're going to primarily focus on positive conclusions not normative conclusions positive means let's see here what is what is and normative conclusions are what should be what should be we are gonna avoid the what should be conclusions now you're gonna want to make some normative conclusions as you go through this class you're gonna say oh because of that that means that's terrible then then this is what we should do so for example you might say oh we might find out economically that there are people in this world who can't have health care they can't get help when they're sick and you may think to yourself oh my goodness now now the fact that we conclude that there are people who don't get medical help that is a positive conclusion that is just a it's just a truth we draw nobody would argue no but generally speaking people do not argue over positive conclusions and so on I'm going to put over here is I'm gonna say here no arguments no arguments over positive economics sometimes we call it positive economics and normative economics so I'm going to put positive econ and here's going to be normative econ okay so in positive economics generally people do not argue over the truth everybody agrees that 17% of the people get no health care at all yes what are your numbers say 17% what are your numbers say 17% we all agree there's no argument but here's where it becomes here's where it becomes argumentative okay people disagree over what that means we should do people disagree because of their values because of their value judgments okay so values because of their values people disagree on normative economics about what should be done and what some people are gonna say is Wow well those seventeen percent of people they should be able to get medical care and therefore what we should do is take some money from somewhere and give those people medical care and some other person because they have different values they're gonna say no that's not what it means at all that would be very expensive we can't take money away from those other things to give health care to these people they're just gonna have to deal with not having health care and this is where people argue is in the normative economics we will do a little bit of normative economics and you will hear me make statements that are related to normative economics and I may say some things that you will disagree with and when you disagree with me chances are you have different values than I have and that's okay you can have different values than me you should have different values than me you can have very similar values but generally speaking every human being has a different set of values and so we're going to disagree sometimes on what should be done but positive economics is what is generally speaking there are no arguments over that and here's what I'm telling you as far as positive economics one of the things that we're going to learn in positive economics is the fact that when the price of something goes down people do buy more of it and we're gonna get to that in a in a much later lesson okay but that's an example of positive economics all right so economics is typic