Final Test – multiple choice Your presents at lectures is compulsory but… you have an exam. Your presents at classes is obligatory
„Microeconomics” Prentice Hall Publishing House, June 2004 ISBN: 0-13-191207-0 Czarny B. „Podstawy Ekonomii” Begg D., „Economics” Friedman M. „Free to Choose” (Wolny wybór) Mises L. „Human Action” http://www.ioz.pwr.wroc.pl/Pracownicy/Chodak/ http://www.ioz.pwr.wroc.pl/Pracownicy/Chodak/
What is the main purpose of economics? Economics studies how individuals and societies use limited resources to satisfy unlimited wants.
Pre-classical economy - Ancient economic thought, Scholasticism, Mercantilism, Physiocrats Classical school - focuses on the tendency of markets to move to equilibrium – Adam Smith … Austrian school (Carl Menger, F.A. Hayek, Ludwig von Mises) Keynesian school (John Maynard Keynes)
Keynes vs Hayek: round two Keynes vs Hayek: "Fear the Boom and Bust" Hayek vs. Keynes "Fear the Boom and Bust" Hayek vs. Keynes
Presentation about broken window fallacy Presentation about broken window fallacy
Milton Friedman speech about The Free Lunch Myth Milton Friedman speech about The Free Lunch Myth
scarcity. (film)film individuals and societies must choose among available alternatives.
the cost of any activity measured in terms of the value of the best alternative that is not chosen (that is foregone) has been described as expressing relationship between scarcity and choicescarcitychoice is assessed in not only monetary or material terms, but also in terms of anything which is of value may be assessed in decision-making process of production. If the workers on a farm can produce either 1 million pounds of wheat or 2 million pounds of barley, then the opportunity cost of producing 1 pound of wheat is the 2 pounds of barley forgone (Film)Film
Assessing opportunity costs is essential to calculate the true cost of any course of action Economic cost=accounting cost + opportunity cost Example: ◦ starting capital 100 tys. PLN, ◦ Run your own business 1 year ◦ Profit 25 tys. PLN
individuals select the choices that make them happiest, given the information available at the time of a decision. Homo economicus, or Economic human, is the concept of humans, who are rational and will always attempt to maximize their utility - whether it be from monetary or non-monetary gains. This theory stands in contrast to the concept of Homo reciprocans, which states that human beings are primarily motivated by the desire to be cooperative, and improve their environment.
economic good (scarce good) - the quantity demanded exceeds the quantity supplied at a zero price. free good - the quantity supplied exceeds the quantity demanded at a zero price. economic bad - people are willing to pay to avoid the item
land ◦ natural resources, the “free gifts of nature”, not processed goods labour ◦ the contribution of human beings capital ◦ machines, buildings, tools, plant and equipment ◦ “financial capital” is used to buy non-financial capital (film1)film1 (Film2)Film2
Branch of microeconomic theory that studies how information affects an economy and economic decisions. Information has special characteristics. It is easy to create but hard to trust. It is easy to spread but hard to control. It influences many decisions. You can’t estimate it’s value before getting to know These special characteristics (as compared with other types of goods) complicate many standard economic theories.
positive economics ◦ attempt to describe how the economy functions ◦ relies on testable hypotheses normative economics ◦ relies on value judgements to evaluate or recommend alternative policies ◦ often used by politicians (film)film
scientific method ◦ observe a phenomenon, ◦ make simplifying assumptions and formulate a hypothesis, ◦ generate predictions, and ◦ test the hypothesis.
Cēterīs paribus (Latin phrase), literally translated as "with other things the same." It is commonly rendered in English as "all other things being equal." abstraction in economics ◦ used to simplify reality (film)film
Hasty generalization ◦ occurs when it is incorrectly assumed that what is true for each and every individual in isolation is true for an entire group. post hoc, ergo propter hoc fallacy (association as causation) ◦ occurs when one incorrectly assumes that one event is the cause of another because it precedes the other. e.g. As ice cream sales increase, the rate of drowning deaths increases sharply. Therefore we can assume: ice cream consumption causes drowning.
microeconomics - the study of individual economic agents and individual markets macroeconomics - the study of economic aggregates, studies economy as a whole
A linear relationship possesses a constant slope, defined as:
If an equation can be written in the form: Y=mX+b, then: m = slope, and b = Y - intercept.
„The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” Henry Hazlitt
As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X. As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law, but what I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. He is the victim of the reformer, social speculator and philanthropist, and I hope to show you before I get through that he deserves your notice both for his character and for the many burdens which are laid upon him.
http://ecedweb.unomaha.edu/Dem_Sup/econ qui2.htm http://ecedweb.unomaha.edu/Dem_Sup/econ qui2.htm 1. This picture shows a demand curve for oranges in a given locality. Please, consider the following events and then illustrate on the chart the impact they would have on the demand: A) the consumer incomes increased B) the price of tangerines increased C) the price of knives which are used to peel oranges decreased D) orange juice became very trendy E) The wife of the prime minister became a shareholder of a few fruits wholesalers and, incidentally the government imposed an obligatory programme „the orange for every child” 2. This picture shows a supply curve for bread in a given locality. Please, consider the following events and then illustrate on the chart the impact they would have on the supply : A) VAT rate grew B) The bread production was subsidized C) The bread baking technology was improved D) The price of flour decreased E) The bakers salaries grew
1. Let there be a supply curve of petrol: Q=P and demand curve: Q=-P+20. A new tax is introduced: every single litre of petrol is taxed with a fixed sum of 2 PLN when sold. Illustrate the impact of the new tax on the chart. Calculate the volume of production in litres before the tax was introduced and after the introduction of the tax. Calculate the new price. Calculate budget income due to the new tax. 2. Let there be a supply curve: Q=P-1, demand curve: Q=-P+5. The government subsidizes the production of beef – every kilogram is subsidized with an extra zloty. Calculate the equilibrium price before and after Introduction of the subsidy. How much will the taxpayer have to lay out to cover the cost of the new subsidy?
What are the names of the two major economics schools? Who are the statists? According to the Austrian School, what are the causes of economic problems? How can you characterize the market process? What would happen if every single person got a million dollars? Why are minimum wages not protecting the most vulnerable workers? http://www.youtube.com/watch?v=rI0vZ5jBA9o http://www.youtube.com/watch?v=rI0vZ5jBA9o