Economics Chapter 1 Scope of study.

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Presentation transcript:

Economics Chapter 1 Scope of study

Method of analysis Postulate of maximization Assumption: Everyone makes choices for self-interest. Everyone tries to maximize self-interest.

Method of analysis  All or nothing analysis Seldom happened Doesn’t make sense Not comprehensive  Marginal decision Comparing the marginal cost and marginal benefit Additional cost vs. additional benefit Economics suggests that a person will balance the marginal benefit and marginal cost of a choice

Method of analysis People response towards incentives Penalties / Punishment Institution of punishment (Smoking prohibition $1500) Removal of rewards (Singer in the park) Rewards Removal of punishment/restriction (Individual visit scheme) Providing direct or indirect rewards (Buy 1 get 1)

Scope of study Economics perspective In what way you analyze such a phenomenon? Any guidance? How do you draw a conclusion towards a situation? Why are you making such a choice?

Scope of study Microeconomics Macroeconomics An individual person, firm or an industry. Individual’s maximizing behaviour. Macroeconomics Aggregate phenomena of the economy Price level, total output and unemployment.

Scope of study Positive statement Normative statement A statement about the real world which can be tested against facts. E.g. Number of tutorials on L.S. will be increased since the NSS. The PSP consoles will be cheaper after the launched of NDSlite. Normative statement A statement which involves value judgments, but can’t be tested against facts. Teacher should give students thousands of questions to do before exam in order to help them get high marks. The government should increase subsidy for university to provide more offers for NSS students.

Try it Which of the following is a normative statement? More students further their studies after the implementation of free tertiary education. The government should allocate more resources to people in need. More people apply for financial assistance when the unemployment rate increases. People spend less when the inflation rate rises.