1. History of economic thought Short characteristic of economics
Petr Wawrosz

2. Term „economy“ or „economics“
Word „economy“ comes from Greek word „oikonomos“
Oikonomos = one who manages a household.
What does have the household and economics common?

3. Household faces decision
Which members of the household do which task and what each member gets in return.
Examples (economic question that a household faces): - Who cooks dinner? - Who does the laundry? - Who gets the extra dessert at dinner? - Who gets to choose what TV show to watch?
Household must allocate its scare resources among its various member, taking into account each member´s abilities, efforts and desires.

4. Society faces decision too
Society must decide what jobs will be done and who will do them.
Economic question the society faces: What goods will be produced? How the goods will be produced? Who will receive the produced goods?
Economic as the science gives answer how the different society solves above mentioned problems and what solutions are better.

5. Scarcity
Fundamental concept of economics that indicates that there is less of a good freely available from nature than people would like.
Scarcity does not mean poverty! Scarcity – objective concept. Poverty subjective concept.
Scarcity leads to competitive behavior!
Scarcity is „beyond“ basic economic questions!

6. Economic system
Different ways how the main economic question are solved.
Traditional
Command
Pure market
Mixed

7. Economics system
Traditional: based on tradition, custom and habits both in production and division of produced goods and services.
Usually no private property. Common property.

8. Economics system
Command economy or centrally planned economy: what how and for whom to produce is decided by some authority.

9. Economics system Pure market economy:
Decision of any economic subject depends on their will, skills and possibilities.
Government does not intervene in economy (does not offer some goods and so on), only provides legal structure.

10. Economics system
Mixed economy: combined significant elements of market and command system (and may be of traditional system).
Government offers some goods, intervenes on some markets and so on.

11. Definition of economics
Economics is the science which studies human behavior as the relationship between ends and scare means which have alternative uses. (Lionel Robbins, 1932).
Economics is a part of social science and studies how people behave to satisfy their needs. (Hubbard and O´Brien, 2010).

12. Definition of economics
Economics is a study of how people organize the use of resources to satisfy their wants. (J. Sickle 1954).
Economics is study how people allocate their limited resources in an attempt to satisfy their unlimited wants. As such, economics is the study how people make choices and how their choices affect their environment. (R. Miller 2012).

13. Definition of economics
In short, economist seeks to understand how well the market economy works and to identify where government may need to intervene to correct specific aspect of market failure. (Lipsey and Chrystal, 2007)
Which economic system is the best one?
Market system: self-organization, efficient organization, based not on benevolence but on self-interest. Self-interest produces a outcome convenient for other people (A. Smith „invisible hand“).
Market failure.
Advantages and disadvantages of other systems.

14. Definition of economics
Economics has been called “The Dismal Science.” But it's also been called “the science of how people get a living.” Our daily lives are beset with economic questions! (Henry George, about 2000)
Economics is a study of mankind in the ordinary business life. (Alfred Marshall, 1890).

15. Microeconomics
Microeconomics is the study of how households and firms make choices, how they interact in markets and how government attempts to influence their choices. - e.g. how consumers and producers respond to changes in prices, income and other facts or incentives.
Try to find the most efficient way (e.g. in reducing smoking, drug policy, global warming)

16. Macroeconomics
Macroeconomics is a the study of economics as a whole, including topics such as inflation, unemployment and economic growth.
It tries for instance to explain: - why economies experience period of recessions and booms, - why in long run some economies have grown much faster than others, - whether the government intervention can improve economic condition.

17. Individual and collective choice
Economics is about individual choice.
People often group to form collective organizations.
Individual choices still underlie and direct the decision made within organization.
Macroeconomic aggregates (GDP, inflation, …) depend on in many individual choices.

18. Topics of economics Consumer and his/her behavior
Producer and its behavior
Equilibrium on specific market
Characteristic of markets – perfect and imperfect competition
Market of factors of production
Capital market (market of lending funds)
Microeconomic general equilibrium theory
Public sector economics, market failures
Government intervention, economic efficiency

19. Topics of economics GDP Macroeconomic equilibrium Economic growth
Business cycle
Money
International economics, exchange rate
Inflation
Unemployment
Aggregate expense (demand)
Fiscal policy
Monetary policy
Aggregate supply

20. Some important economic terms
Entrepreneur
Cost (total, average, marginal, fixed, variable, explicit, implicit, opportunity, sunk)
Innovations
Profit (economic, accounting
Technology
Firm, company, business
Household
Goods
Factors of production
Services
Physical capital
Revenue (total, average, marginal)
Human capital
Social capital

21. Positive versus normative economics
Positive economics: what is among economic relationships. The statements are only about actual or alleged facts.
Normative economics: what ought to (should) be, what is good or bad. The value judgments are necessary to assess the truth of statement.
See:

22. Positive statements
Normative statements
Higher interest rates cause people to save more.
People should save more.
High income tax rate discourage effort.
Governement should tax the rich to help the poor.
High taxes on cigarettes discourage smoking.
Smoking should be discouraged.
Roaduse charge would increase traffic.
The tax system should be used to reduce traffic.
People are more worried about inflation than unemployment.
Technical chance is a bad thing because it puts some people out of work.
The burning of fossil fuels is causing global warming.
Government should do more to reduce carbon emissions in order to save the planet from global warming.

23. Why do economists often disagree
Different benchmark
Differences between short and long consequences.
It is not clear by what factors a output was caused. The importance of the specific factor.
Different values.
Economics is one of the youngest sciences known to man.