1. University of Papua New Guinea Principles of Microeconomics Lecture 1: Introduction

2. The University of Papua New Guinea Slide 1 Lecture 1: Introduction Michael Cornish Overview Aim of the course Structure of the course The economic problem Economics as a social science Efficiency v. equity Foundational ideas of economics Textbook Online resources Assessment

3. The University of Papua New Guinea Slide 2 Lecture 1: Introduction Michael Cornish Aim of the course To understand: –How markets work => i.e. how consumers and firms make choices and interact in markets –The limitations of the market, and when and why government intervention could help to achieve public policy goals

4. The University of Papua New Guinea Slide 3 Lecture 1: Introduction Michael Cornish Aim of the course To understand: –The limitations of government intervention into markets, and when and why government intervention may not help to achieve public policy goals PLUS: –To develop analytical and critical thinking skills and use them to design microeconomic policy …and all with at least a little enthusiasm!

5. The University of Papua New Guinea Slide 4 Lecture 1: Introduction Michael Cornish Structure of the course The basics of markets + Thinking about efficiency and equity Intro and foundational concepts Market structures and firms Market failure and government regulation + Case studies Weeks 2 – 4 Week 1 Week 5 – 8 Week 9 – 13 RevisionWeek 13

6. The University of Papua New Guinea Slide 5 Lecture 1: Introduction Michael Cornish The economic problem Economics: –All about money? –The economic problem: unlimited wants versus finite resources –Economics ≠ capitalism The economic spectrum: Central planning mixed economy laissez-faire capitalism

7. The University of Papua New Guinea Slide 6 Lecture 1: Introduction Michael Cornish Economics as a social science A social science: the ‘dismal science’ Where does economics intersect with politics? »EVERYWHERE! Positive v. normative economic analysis: –Positive: Value-free analysis (can be checked with facts) –Normative: Value-laden analysis (can only be checked by referring to moral principles)

8. The University of Papua New Guinea Slide 7 Lecture 1: Introduction Michael Cornish Efficiency v. equity There is often a trade-off! Is economics about efficiency or equity? –Productive efficiency A product is made using the least amount of resources –Allocative efficiency Resources are allocated according to their most productive social use

9. The University of Papua New Guinea Slide 8 Lecture 1: Introduction Michael Cornish Some foundational ideas Some foundational ideas of economics: –People make rational decisions –People respond to (economic) incentives –Decisions are made at the margin Decision rule MB > MC (up until MB = MC) Known as ‘marginal analysis’

10. The University of Papua New Guinea Slide 9 Lecture 1: Introduction Michael Cornish Some foundational ideas Opportunity cost: –The value of the next best alternative –Distinguishes the decision-making in economics from mere accounting! Microeconomics: the study of markets and their participants Macroeconomics: the study of the economy as a whole

11. The University of Papua New Guinea Slide 10 Lecture 1: Introduction Michael Cornish Textbook ??th Edition

12. The University of Papua New Guinea Slide 11 Lecture 1: Introduction Michael Cornish Online resources All material in the course will be made available at: –http://michaelcornish.org/principles-of-micro/http://michaelcornish.org/principles-of-micro/ This means: –The course outline –Lecture powerpoints –Links to articles and.pdfs –Anything else relevant or useful !

13. The University of Papua New Guinea Slide 12 Lecture 1: Introduction Michael Cornish Assessment Tutorial Participation: 5% –Tutorials are every week, starting in Week 2 Tutorial Hand-ins: 10% –Due in tutorials every week, starting from Week 3 Attendance at ‘Economics Inspired’ sessions: 5% –Sessions are every week, starting in Week 2

14. The University of Papua New Guinea Slide 13 Lecture 1: Introduction Michael Cornish Assessment Class Exam 1: 15% –Will be held in a lecture slot in Week 6 –Will cover all material from Weeks 1 to 4 Class Exam 2: 15% –Will be held in a lecture slot in Week 10 –Will cover all material from Weeks 5 to 8

15. The University of Papua New Guinea Slide 14 Lecture 1: Introduction Michael Cornish Assessment Final Exam: 50% –Will cover the entire course! –No ‘double-pass’ required (i.e. it is technically possible to pass the course without passing the exam – but I wouldn’t recommend this as a strategy!!) –Details about time, date and location to be provided as soon as they are confirmed

16. The University of Papua New Guinea Slide 15 Lecture 1: Introduction Michael Cornish Some final words…