Download Lecture 1: An Introduction to Economics

Lecture 1: An Introduction to
Economics
What will be considered in this unit?
What is economics?
• A set of frameworks for analysing the
interaction of individuals, groups,
governments and countries in relation to the
exchange of goods, services, money and
information.
• Economics is another perspective on
individual and social behaviour
• It is a social science that sometimes uses
techniques derived from the sciences
Economics & the knowledge tree
Philosophy
Natural sciences
Politics
Economics
Psychology
Biology
Maths
Physics
Economists in Action
• Macro-economists: Studying national economies
– advising governments
– private financial market advice
• Micro-economists: Studying particular markets
– labour economists
– natural resource economists
– social economists (eg the economics of crime)
Purpose of the unit
• To introduce the basic frameworks
• To introduce you to the ‘economic way of
thinking’
– ‘How would an economist analyse this issue?’
• To familiarise you with the language
• To develop the capacity to interpret basic
economic data
If you understand economics you have
the potential to:
• Better understand the factors that most affect
businesses
• Better understand human behaviour
• Anticipate economic trends, such as interest
rate and the share market
• Make better choices in your private and work
lives
• Make better use of knowledge gained in
other disciplines
The Level of This Unit
• A lot of assumptions and simplifications are
used in order to get to basic concepts
• Concepts reflect tendencies in the ‘real
world’ but do not explain every detail
• Focuses on mainstream economics
– There is considerable debate on many ideas
• Later units explain and qualify more of the
assumptions
Some of the Ten Principles
1. Decisions mean trade-offs
• Individuals
– Time, money & life choices
• Business
– Expenditure, product, investment
• Governments
– Equity vs efficiency
– Taxations vs welfare
– Freedom vs regulation
2. Opportunity Cost
• The true cost of a decision is what you ‘give
up’
• True cost = explicit cost (money outlayed) +
implicit cost (things you forego)
3. Rational people think at the
margin
• Modern microeconomics is based on the
idea of considering the next step
– The satisfaction gained from consuming one
more item (marginal utility)
– The cost of producing one more item (marginal
cost)
– Don’t focus on average costs or returns or sunk
costs
• The economics of the ‘next step’
4. People Respond to Incentives
• Examples
– Lower income tax & higher consumption
– Higher sales tax on cigarettes & lower
consumption
• But, beware the unintended consequence
– Eg increased garbage dump prices & littering
5. The ‘universal’ benefits of trade
• Specialisation in production and trade leads
to a net increase in available goods
• The basis of industrial modernisation
6. Markets are a good way to
organise economic activity
• Freedom of consumption & production
• Relatively efficient exchange system
• Consumer demand is the key market signal
7. Governments can sometimes
improve markets
• Market failure
– Externalities (eg pollution)
• Public goods (eg defence)
• Social decisions
• Monopoly or unfair power relationships
Thinking Like an Economist
Economist as Scientist
• The Use of Assumptions
– eg Consumption behaviour
– Stock market behaviour
• Theories
• The Use of Models
• Observation & Data collection
An Example of an Economic
Model
The Circular Flow
•
•
•
•
A mind map for thinking about the economy
Identifies the economists’ ‘building blocks’
Differentiates goods and factor markets
Shows the economy as an interconnected
system
Factors of
Production
Firms’
Expenditures
Factor Markets
Households’
Income
Factors of
Production
Households
Firms
Goods &
Services
Household
expenditure
Firms’
Incomes
Product Markets
Goods &
Services
Economic Sectors
•
•
•
•
Firms
Households
Government
Overseas
– replicates each of the other sectors
• Known as the four sector model
The Economist as Policymaker
• National accounting
• Studying economic trends
– Warnings and implications
• Analysing policy options
• Estimating the ‘true’ cost of actions
Statements
Positive
vs Normative
• A description of ‘what
is’
• ‘Taxes for the
wealthiest 20% of the
population have
increased in the last 5
years.’
• * May be incorrect but
still positive.
• A comment on ‘what
ought to be’
• ‘The rich should be
taxed in order to
provide money for the
poor.’
Applied economics influences:
•
•
•
•
•
•
Interest rates
Exchange rates
Industry assistance
Taxation levels
Allowances and benefits (eg Austudy)
Trade rules
Reading
• Stonecash et al. (text) Chapters 1, 2 &
Appendix in Chapter 2, for discussion of
graphs in economics
• Hakes & Parry (study guide) Chapters 1, 2
Self-Test (Hakes & Parry): Chapter 1
• Match all Terms & Definitions
• Do both Practice Problems
• Do Short Answer Questions
– 2, 4, 5, 7, 8, 9, 10, 11 & 13
• Do all True/False Questions
• Do Multiple Choice Questions
– 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 16, 17, 18, 19
• Make notes to answer Advanced Critical Thinking
– Questions 1 to 4
• Check answers in guide and revise accordingly
Self-Test (Hakes & Parry): Chapter 2
• Match all Terms & Definitions
• Do Practice Problems 1, 2, 3 & 4
• Do Short Answer Questions
– 3, 4, 5, 6, 7, 8, & 10
• Do all True/False Questions
• Do Multiple Choice Questions
– 1, 2, 4, 5, 6, 7, 8, 10, 12, 13, 14, 15, 16, 18 & 19
• Make notes to answer Advanced Critical Thinking
– Questions 2, 3 & 4
• Check answers in guide and revise accordingly
Course information
Lectures
• Notes available in advance
– USQconnect
• Study desk
• Overview of main themes
• Explanation of notes
• Assessment tips
Economics Workshops
• 2 hour session with 2 segments
– 1. Peer assisted Learning
– 2. Tutorial
• Workshops start tomorrow (Friday)
• Changes to workshop (tute) registration are to be
made only through unit leader
• Changes in tute enrolment only to those that are
not full
– Reviewed as places become available
Workshop offerings
•
•
•
•
10 workshops based on full enrolment
Some may eventually be phased out
Depending on attendance
All tutes are on from tomorrow until further
notice
Responsibilities
• Lecturer deals with
– All administrative arrangements
– Complaints and concerns
– marking moderation
• Tutors:
– elaborate on main concepts and techniques
– mark assignments
– address content-related questions
Responsibilities (cont.)
• PALS (Peer Assisted Learning) Leaders
–
–
–
–
Develop study skills
Prepare students for assessment
Conduct activities to facilitate learning
They do not deal with admin or assessment
issues
Class behaviour
• Consideration for others in lectures &
workshops
• Civility & politeness
• Completing assigned work
• Switch off mobile phones in class
Assessment
• 2 Web Tests
– based on any notes or discussion from lectures,
tutorials or PALS & activities set in tutorials or
PALS
– 25 multiple choice questions
– Tests open 5pm-8pm
• Test 1 Wednesday April 16
• Test 2 Wednesday May 28
– You must complete test in one attempt
• Once you start you must complete & submit
• Assignment
– Topic on Study Desk site or External study
intro book
– Due May 9
Exam
•
•
•
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30 Multiple Choice
5 Short Answer questions
2 Extended response (small essay)
Largely based on the recommended
exercises and questions from the study
guide (Hakes and Parry)
News and announcements
• USQconnect
– ECO 1000 study desk
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•
•
•
Announcements
Assessment
Discussion
Unit leader monitors discussion
Consultation
• Geoff Cockfield
– Monday: 1-4 (unavailable March 24)
– Thursday 2-5
– After lectures for admin issues and questions
arising from the lecture
– Other times available strictly by appointment
only
• Tutors
– to be announced in Tutes