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Unit 1 Introduction to economics

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2 topics · 7 learning objectives

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  1. 1.1 What is economics?

    1. 1.1.1Economics as a social science

      • Economics studies social choices about resource use and economic well-being • Microeconomics studies individual markets; macroeconomics studies whole economies • The nine key concepts provide the lens for analysing economic decisions

    2. 1.1.2The problem of choice

      • Factors of production are land, labour, capital, and entrepreneurship • Scarcity exists because unlimited needs and wants face limited resources • Scarcity creates opportunity cost, trade-offs, and sustainability challenges • Free goods do not require opportunity cost in the same way as scarce economic goods

    3. 1.1.3Basic economic questions and systems

      • Societies decide what and how much to produce, how to produce, and for whom to produce • Answers differ across free market economy, planned economy, and mixed economy systems • Market versus government intervention provides different ways to allocate resources

    4. 1.1.4Production possibilities curve model

      • PPC shows scarcity, choice, opportunity cost, unemployment of resources, efficiency, actual growth, and growth in production possibilities • Opportunity cost can be increasing or constant depending on model assumptions • Diagram: PPC illustrating choice, opportunity cost, unemployment, actual growth, and growth in production possibilities • Diagram: PPC showing increasing versus constant opportunity cost

    5. 1.1.5Circular flow of income model

      • Circular flow shows interdependence between households, firms, government, banks, financial sector, and foreign sector • Leakages and injections affect the flow of income in an economy • Diagram: circular flow of income model with leakages and injections

  2. 1.2 How do economists approach the world?

    1. 1.2.1Economic methodology

      • Positive economics uses logic, hypotheses, models, theories, ceteris paribus, empirical evidence, and refutation • Normative economics involves value judgments in policy making • Equity and equality are distinct ideas and may be interpreted differently

    2. 1.2.2Economic thought

      • 18th century thought includes Adam Smith and laissez faire • 19th century thought includes classical microeconomics, utility, the margin, Say's law, and Marxist critique • 20th century thought includes the Keynesian revolution, macroeconomic policy, monetarism, and new classical counter-revolution • 21st century thought includes behavioural economics, interdisciplinarity, sustainability, interdependence, and circular economy ideas