Lecture_1_handout - How do we learn economics? EC1301...

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1 EC1301 PRINCIPLES OF ECONOMICS How do we learn economics? • Focus on core economic concepts and principles • Learn economics through applications of concepts and principles to problems LECTURE 1 CHAPTERS IN TEXTBOOK: 1 and 2 AGENDA 1. Introduction - What is Economics? 2. Positive vs Normative Analysis 3. Key Economic Questions 4. The Economist’s Way of Thinking 5. Main Branches of Economics 6. Five Key Principles of Economics What is Economics? The Science of Choice – by individuals, organizations, and society – Only individual members of society make choices Individually collectively Why do WE have to choose? Trade-offs are a fact of life – Anything “good” we want requires resources Scarcity – arises because the resources we own are finite – there are alternative uses to the resources we own
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2 Scarcity For the individual – Time is finite. – If you take a part-time job, each hour on the job means one less hour for study or play. For an organization – The amount of land a city has is limited. If it uses a plot of land for a park, it has one less for housing, retailing, or industry. For the society – Air quality – Allowing more cars on our roads means poorer air quality Factors of Production Resources or production inputs Types – Land natural resources provided by nature – Labor physical and mental effort of people – Capital Physical machinery, structures and infrastructure Human knowledge and skills – Entrepreneurship organizational skills and effort Positive and Normative Analysis Economics – does not tell us “what to choose” – does tell us there are alternatives – only by knowing the alternatives can good decisions be made. Harry Truman once said he wanted an economic adviser who is one-handed … Positive Economics predicts the consequences of alternative actions – What will be? or What is? Normative Economics – What ought to be? – Public Policy debates Examples Foreign maid levy – Positive: If the government increases the foreign maid levy, how many working mothers will leave the labor market? – Normative: Should the government raise the foreign maid levy? Children Development Co-Savings Scheme (aka Baby Bonus, April 2001; enhanced, August 2004) – Positive: Will introducing the Baby Bonus increase fertility? – Normative: Should the government subsidize raising a family?
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3 Three Key Economic Questions How and what choices made by the individuals, organizations and government in society answer the 3 key questions regarding the use of the society’s limited resources: 1. What to produce? 2. How to produce? 3. For Whom are the goods produced? The Role of Models in Thinking A model is an abstract construct –a simplified description of the economic environment that allows us to analyze the situation or problem in a logical way Examples of abstract models – A computer model of climate change – A road map
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This note was uploaded on 03/19/2012 for the course ARTS EC1301 taught by Professor Forgot during the Fall '08 term at National University of Singapore.

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Lecture_1_handout - How do we learn economics? EC1301...

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