1. Economics
Issues and Concepts

2. We start by thinking about an economy as a self-organizing system.
Compare that to a human body.
This system is (rather) efficient.
Could you give an example when it’s not?
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."   --  Adam Smith

3. There is a considerable variety in what/how economists do but there’s also some stuff that makes them belong to the same gang.
Here’s a basic set = the economist’s paradigm:
The wants are unlimited.
The resources are scarce.
Scarcity implies choice.
Homo economicus = one making smart choices.
Economics studies how the choices are made.
So it is a particular way of looking at (any) behaviour.

4. Definitions: Resources = factors of production:
Land = unmanufactured + used to produce
Labour = human resources
Capital = manufactured + used to produce
Vineyard = land + capital?
Engineer = labour + capital?
Goods = satisfy our wants + tangible
Services = satisfy our wants + intangible
Consumption = wants + goods and services
What else is there?

5. Scarcity implies choice. Choice implies cost.
Cost is what an economist thinks about 24/7.
Opportunity cost = the value of the best alternative.
Cost of your studies
Production Possibility Frontier
Scarcity on the PPF
Choice on the PPF
Cost on the PPF

6. One way to think about microeconomics and macroeconomics:
Micro: decisions by individuals (firms, households) about what to do;
Macro: what determines the aggregates (GDP, price level, unemployment rate);
Another way is to reflect on the PPF
The PPF is the aggregates, so macroeconomics is about what determines its shape and position. And also whether our true position is on the PPF.
Growth
Idle resources
How that stuff is split is a microeconomist’s concern:
What’s produced? How? By whom?
What is consumed? By whom?

7. How does homo economicus make decisions:
She compares the alternatives;
She picks the best one = she maximizes;
Individuals maximize utility (assumption)
Firms maximize profits (implication)
Why?
An economist’s way to think about maximizing behaviour is to think about choices on margin
Marginal cost
Marginal benefit
Marginal revenue
Marginal surplus and marginal profit

8. The circular flow models
Many demand are derived
The markets are interdependent
Money is important

9. Observations that matter:
Specialization ** by an individual;
Division of labour ** within a firm;
Money ** facilitate trade
Better than barter
Money and specialization
Globalization
Transportation costs
Information
Is it good?

10. What would a government do?
The economic Systems:
Traditional economy;
Command economy;
Market economy;
Mixed economy;
Which one is better?
What would a government do?
Keep order
Rules (laws)
Enforcing the rules
Fix market failures
Efficiency
Distribution