1. Chapter 1 Nature of Economics1 Content Part I What is economics? Part II Consumption, Production & Exchange Part III Market structure Part IV Factor market Part V Market Coordination & Efficiency

2. Chapter 1 Nature of Economics2 Part I What is economics? Chapter 1 Nature of Economics Chapter 2 Scarcity & Competition Chapter 3 Supply, Demand & Price Chapter 4 Methodology of Economics

3. Chapter 1 Nature of Economics3 Learning Objectives What is Economics? Micro vs. Macro Economics Policy

4. Chapter 1 Nature of Economics4 Learning Objectives What is Economics? Micro vs. Macro Economics Policy

6. PRODUCTIONCONSUMPTION COORDINATION Production of goods and services Consumption of goods and services Coordination of production and consumption

7. Question What are economic issues?

8. Social Issues Unemployment Inflation International Trade Falling/Rising of Prices of Residential Flats Education Pollution Crime rate Public Health Single Parent Families Economic Issues? Yes!

9. Chapter 1 Nature of Economics9 What is Economics? Economics is a social science that attempts to explain and predict human behaviour within a market.

10. Question What are the differences between natural science and social science?

11. Chapter 1 Nature of Economics11 What is Economics? Natural Sciences are disciplines that deal with the objects, phenomena or the laws of nature and the physical world. Examples: biology, chemistry,and physics.

12. Chapter 1 Nature of Economics12 What is Economics? Social sciences are scholarly or scientific disciplines that deal with the study of society and individual relationships, within it. Examples: sociology, psychology, anthropology, economics, political science and history.

13. Question What is the major characteristics of a ‘science’ subject?

14. Chapter 1 Nature of Economics14 What is Economics? Science use scientific models and theories to make predictions and explaining phenomena.

15. Chapter 1 Nature of Economics15 What is Economics? There are 2 major problems faced by social scientists or economists: 1.It is difficult or impossible to conduct a controlled experiment. 2.Human behaviour can be distorted by human will.

16. Chapter 1 Nature of Economics16 Learning Objectives What is Economics? Micro vs. Macro Economics Policy

17. Chapter 1 Nature of Economics17 Micro vs. Macro Economics is traditionally divided into two main branches: –Microeconomics –Macroeconomics

18. Microeconomics Macroeconomics

19. Chapter 1 Nature of Economics19 Micro vs. Macro Microeconomics is concerned with individual decisions, and the units of investigation are individuals in the economy. Macroeconomics is concerned with the economy as a whole. It is the study of economic aggregates such as unemployment, inflation, growth and the balance of payments.

20. Chapter 1 Nature of Economics20 Learning Objectives What is Economics? Micro vs. Macro Economics Policy

21. Social Issues Unemployment Inflation International Trade Falling/Rising of Prices of Residential Flats Education Pollution Crime rate Public Health Single Parent Families Economic Issues? Yes!

22. Example Should the government increase the places of university? Do we have enough money to finance the additional university places during recession? Shall we raise the school fee?

23. Chapter 1 Nature of Economics23 Economics Policy To answer those questions, we have to differentiate 2 different types of issues: –Normative issue –Positive issue

24. Chapter 1 Nature of Economics24 Economics Policy Normative statement is a statement of value. It is a statement about what ought to be or ought not to be, about whether something is good or bad, desirable or undesirable. Examples: you should keep quiet in the classroom, you are pretty.

25. Chapter 1 Nature of Economics25 Economics Policy Positive statement is a statement of fact. It can be right or wrong, and its validity can be verified by appealing to facts. Examples: this is a blackboard, you get 80 marks in your examination

26.  The oil prices should be lower.  The price will rise if the supply decreases.  The unemployment rate will increase if the government raises the tax rate.  The government should reduce the unemployment rate. PositiveNormativeIssue

27.  The oil prices should be lower.  The price will rise if the supply decreases.  The unemployment rate will increase if the government raises the tax rate.  The government should reduce the unemployment rate. PositiveNormativeIssue