1. Economics
Chapter 1
Scope of study

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

3. 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

4. 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)

5. 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?

6. 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.

7. 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.

8. 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.