Transcript File

Economics
Chapter 1
Scope of study
1
Method of analysis
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Postulate of maximization
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Assumption:
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Everyone makes choices for self-interest.
Everyone tries to maximize self-interest.
2
Method of analysis
 All or nothing analysis
Seldom happened
Doesn’t make sense
Not comprehensive
 Marginal decision
Comparing the marginal cost and marginal benefit
Additional cost vs. additional benefit
Economics suggests that a person will balance the marginal
benefit and marginal cost of a choice
3
Method of analysis

People response towards incentives
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Penalties / Punishment
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Institution of punishment (Smoking prohibition $1500)
Removal of rewards (Singer in the park)
Rewards
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Removal of punishment/restriction (Individual visit scheme)
Providing direct or indirect rewards (Buy 1 get 1)
4
Scope of study

Economics perspective

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In what way you analyze such a phenomenon? Any
guidance?
How do you draw a conclusion towards a situation?
Why are you making such a choice?
5
Scope of study

Microeconomics
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An individual person, firm or an industry.
Individual’s maximizing behaviour.
Macroeconomics
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Aggregate phenomena of the economy
Price level, total output and unemployment.
6
Scope of study

Positive statement

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A statement about the real world which can be tested against facts.
E.g.
 Number of tutorials on L.S. will be increased since the NSS.
 The PSP consoles will be cheaper after the launched of NDSlite.
Normative statement


A statement which involves value judgments, but can’t be tested
against facts.
E.g.
 Teacher should give students thousands of questions to do before
exam in order to help them get high marks.
 The government should increase subsidy for university to provide
more offers for NSS students.
7
Try it

Which of the following is a normative
statement?
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More students further their studies after the
implementation of free tertiary education.
The government should allocate more
resources to people in need.
More people apply for financial assistance
when the unemployment rate increases.
People spend less when the inflation rate rises.
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