Lecture 1

Question 1

Economics is

Answer 1

Economics is the study of the choices people and societies make to attain their unlimited wants, given their scarce resources.

Question 2

Learning objectives

Answer 2

Understand what economics is about.
Define the concept of opportunity costs.
Discuss the pillars of the neoclassical economic policy consensus.
Apply the compound interest formula on economic growth.
Perform data analysis on economic growth between countries.

Question 3

what is macroeconomics

Answer 3

Macroeconomics is the study of the economy as whole. Example inflation, economic growth. (big picture)

Question 4

what is microeconomics?

Answer 4

Microeconomics is the study of how households and firms make choices, how they interact in the market and how Government influences their decision. (small picture)

Question 5

What is an opportunity cost?

Answer 5

• The true cost of something is what you give up to get it.
• eg. University student - gives up time, financial
• eg. Opportunity cost of going to a movie -
  
  • Price of the ticket
  • The cost of the ticket + cost of parking/transport, popcorn, drinks
  • Total expenditure incurring in going to the movie + the value of your time
  • Zero - as long as you enjoy the movie and you consider it a good use of your money and time

Question 6

Adam Smith

Answer 6

Adam Smith

• Founder of the modern discipline of Economics
• New concepts: natural price, equilibrium, laws of market.

Question 7

Alfred Marshall

Answer 7

Alfred Marshall

• Supply and demand.
• Elasticity.
• Consumer’s surplus.
• Economics became its own distinct field of study (definition of economics)

Question 8

What years was the great depression?

Answer 8

1929-1941 - longest and deepest depression of the 20th century

Question 9

John Maynard Keynes

Answer 9

• Challenged the classical neoclassical position
  
  • Free markets do NOT provide a solution for the unemployment.
  • Aggregate demand is the most important driving force in an economy.
  • Main idea: Government intervention to achieve full employment and stability.
  • Policy to smooth the business cycle.

Question 10

Milton Friedman

Answer 10

Monetarist and main advocate against Keynesian policies

Question 11

Keynesian Policy

Answer 11

• Focus on - ups and down of the business cycle
• Goal - full employment
• Reliance on - Government interventions

Question 12

neoclassical/neoliberal model

Answer 12

• Focus on - economic growth
• Goal - low and stable inflation/low government debt
• Reliance on - the working of markets

Question 13

What is economic growth

Answer 13

• the capacity of an economy to increase the levels of output from one year to the next.
• Measured using GDP