Topic 1 Overview of Economics Agenda Syllabus Review Introduction to Economics Microeconomics versus Macroeconomics Economics Art or Science Semester Overview Syllabus Review About me Permission Numbers Emails Textbook Aplia Homework Register using recitation discussion Number Syllabus Introduction Micro vs Macro Econ Art or Science Moodle Forums Disabilities Academic Dishonesty Grading Recitations Other Resources tutors Semester Overview What is economics and why do we study it Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview What is economics Social Science i e studies human behavior Examines the interactions and decisions that form an economy Key condition Scarcity Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview A couple of definitions Scarcity The observation that people have unlimited wants but limited resources Economics The study of how society manages its scarce resources Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview Why do we care about scarcity Syllabus Introduction Micro vs Macro What are the costs of a free cell phone Econ Art or Science Semester Overview Okay but then why micro and macro i e Isn t there a single correct way Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview Micro vs Macro Microeconomics Macroeconomics The study of how individual consumers households and firms make decisions and behave in a market The study of economicwide phenomena such as inflation unemployment and economic growth Intuition By studying individual bees we can understand a swarm Intuition A tornado and a thousand fans are very different things Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview So how good are the predictions And why can t we solve the problems facing us today Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview This isn t rocket science but it can be just as hard Can t run tests on the entire US economy People s behavior and preferences are constantly changing How do we measure how much someone dis likes Justin Bieber We will make a lot of simplifications Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview Then what s the point Even with simplifications can accurately describe model the economy Question What does everyone give freely but no one wants to receive Advice Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview Hi Mom what s going on Positive Statements Claims that describe the world as it is can measure this i e Here s what you are doing wrong Ex You party too much Normative Statements Claims that prescribe how the world should be can t measure i e Here s what you should be doing Ex You should study 40 hours per week Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview What types of economies are there Warning I m a socialist but I believe in capitalism Syllabus Introduction Micro vs Macro Econ Art or Science Types of Economies Two general systems Command System Government owns most resources central planning board makes decisions Ex Communism Note NOT Socialism Market System Resources are privately owned goods allocated according to profit motive and markets Ex Capitalism Syllabus Introduction Micro vs Macro Econ Art or Science Types of Economies Capitalism or Communism or something else Market Pros Command Pros 1 Private Property Rights 1 Public Property 2 Freedom of Enterprise Free entry exit regulates market Introduction Micro vs Macro Only produce goods with value 3 Limited Competition 4 Existence of market prices 5 Active but limited government Syllabus Government chooses resource use for greatest benefit 2 Limited Enterprise You choose what goods to produce 3 Competition You choose how to use resources you own Econ Art or Science Stability in employment and production 4 Command prices Those who need it can afford it 5 Active government Types of Economies An Economic System answers the following questions Questions Market Command What goods and services produced Anything legal that someone wants to buy Central Planning Board chooses How will they be produced To generate maximum profits for firms Most beneficial way for country and citizenry Who gets them Whoever can afford it People who need them as determined by the government What if preferences change New firms created to meet new demand Takes a long time to change What about technological progress Automatically used to reduce prices May not be used if negative impact i e reduces employment Syllabus Introduction Micro vs Macro Econ Art or Science Types of Economies What are we going to do this semester A high level overview Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview Model the economy Who participates in the economy Syllabus How do they interact Through Markets People Firms Government Rest of the world Introduction Micro vs Macro Econ Art or Science Financial Factor Output Semester Overview We will examine each of the agents in detail People and Firms Rest of the World Aggregate Supply and Demand Prices and Inflation Improving lifestyles GDP Trade Governments Fiscal Policy Monetary Policy Syllabus Introduction Micro vs Macro Econ Art or Science Semester Overview
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