Transcript Chapter 1
Lecture 1 Dominika Milczarek-Andrzejewska The Nature and Method of Economics Introduction • Office hours: Thursday 16.45-17.45, room 401 • E-mail: [email protected] • http://www.ekonpol.wne.uw.edu.pl • Required Textbook: C.R. McConnell and S.L. Brue, Economics • Written exam: multiple choice and open questions 2 Course outline: 1. Nature and Method of Economics 2. Economics as Social Science 3. Principles of Economic Methodology 4. Economic Systems 5. The Economizing Problem 6. Consumer Behaviour 7. The Costs of Production 3 Course outline: 8. Market Equilibrium 9. Market Failure and Externalities. Economic Role of Government 10. Macroeconomics - Basic Concepts 11. Economic Growth and Economic Development 12. Employment and Unemployment. Human and Social Capital 13. International Economics and World Economy 4 Outline of Lecture 1 • The Economic Perspective – Scarcity and Choice – Rational Behaviour – Benefits and Costs • Why Study Economics? 5 Definition of Economics Economics is the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants. 6 Definition of Economics Economics allows to answer very important questions: – What to produce? – How to produce? – For whom? 7 Definition of Economics Origins of the term: • Directly from Old French word economie meaning “management of a household” • Adopted from Latin word oeconomia and Greek word oikonomia (Oikos meaning house and –nomos meaning managing) 8 The Economics Perspective • SCARCITY & CHOICE • We „can’t have it all” – decision what we will have and what we must forgo • “There is no free lunch” • alternative use of resources: land, capital, labor • opportunity costs – to get more of one thing you forgo opportunity of getting something else 9 The Economics Perspective • RATIONAL BEHAVIOR Pursuing opportunities to increase utility UTILITY “Pleasure, happiness, satisfaction” Individuals weigh costs and benefits – their decisions are „rational” (not „random”) 10 The Economics Perspective • RATIONAL BEHAVIOR • Different choices under different circumstances • Different choices made by different people (different preferences) self-interest ≠ selfishness • helping family • contributing to charities 11 The Economics Perspective MARGINAL ANALYSIS Marginal Benefits & Marginal Costs Choices involve changes in the status quo “Marginal” means “extra”, “additional” or “a change in” For example: • Should you study an extra hour for an exam? • Should government increase or decrease funding for education? 12 Why Study Economics Most of the ideologies of the modern world have been shaped by prominent economists of the past: • Adam Smith • David Ricardo • John Stuart Mill • Karl Marx • John Maynard Keynes • plus many modern contributors... For example, the president of United States benefits from the recommendations of his Council of Economic Advisors 13 Why Study Economics Economics for Citizenship Most of today’s political problems have important economic aspects. For example: • What level of taxes should we have? • How can we reduce poverty? 14 Why Study Economics Professional & Personal Applications Improvement of analytical tools necessary for business and personal needs. For example: • Is it more economical to buy or lease a car? • Last but not least: studying economics as an investment 15 Lecture 2 Economic Methodology • Economics and Other Sciences, • Theoretical Economics and Policy Economics, • Macroeconomics and Microeconomics • Positive and Normative Economics 16