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The Nature and Method of Economics. Lecture 1 Dominika Milczarek-Andrzejewska. 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. McCo nn ell and S.L. Brue, Economics - PowerPoint PPT Presentation
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The Nature and Method of Economics
Lecture 1Dominika Milczarek-
Andrzejewska
2
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
3
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
4
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
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Outline of Lecture 1
• The Economic Perspective– Scarcity and Choice
– Rational Behaviour
– Benefits and Costs
• Why Study Economics?
6
Definition of Economics
Economics is the social science concerned with the efficient use of
scarce resources to achieve the maximum satisfaction of economic
wants.
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Definition of Economics
Economics allows to answer very important questions:
– What to produce?
– How to produce?
– For whom?
8
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)
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• 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
The Economics Perspective
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• RATIONAL BEHAVIORPursuing opportunities to increase
utility
UTILITY “Pleasure, happiness, satisfaction”
Individuals weigh costs and benefits – their decisions are „rational” (not „random”)
The Economics Perspective
11
• RATIONAL BEHAVIOR• Different choices under different circumstances
• Different choices made by different people (different preferences)
self-interest ≠ selfishness• helping family
• contributing to charities
The Economics Perspective
12
The Economics Perspective
MARGINAL ANALYSIS
Marginal Benefits & Marginal CostsChoices 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?
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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
Why Study Economics
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Why Study Economics
Economics for CitizenshipMost of today’s political problems have important
economic aspects.
For example:• What level of taxes should we have?• How can we reduce poverty?
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Why Study Economics
Professional & Personal ApplicationsImprovement 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
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Lecture 2
Economic Methodology
• Economics and Other Sciences,
• Theoretical Economics and Policy Economics,
• Macroeconomics and Microeconomics
• Positive and Normative Economics