Introduction.ppt

1、Economics,Lectured by: Zeng Jianghui Tel:Email: ,Introduction,Two topics to be discussed: Something about the course Ten principles of economics,Something about the course,.Course Description This course (Economics) includes Microeconomics and Macroeconomics. Microeconomics studies how

2、individuals and firms make decisions. Macroeconomics looks at the economy as a whole and includes a discussion of topics inflation and unemployment.,.Course Schedule,We will have ten chapters. Six of them are about microeconomics and they are Price theory, Utility theory, Production theory, Cost the

3、ory, Market theory and Market failure theory. Others are about macroeconomics. They includes National income accounting, NI-AE model, IS-LM model, Inflation and Employment theory and macroeconomics policy.,.Assessment Plan,Assessment of your accomplishment in the course consists of attendance and cl

4、assroom performance (40%), and a paper in English at the end of the semester (60%).,Classroom Performance: lecture attendance, participation in classroom activities, dictation once two weeks. A paper: more than 1000 words, which should be written by hand. about microeconomics or macroeconomics topic

5、s.,.Suggested Reading,Core Textbook: N.Gregory Mankiw, Principles of Economics, 3rd Ed., 2004 by Thomson Learning. Supplementary Textbooks: 1.Joseph E. Stiglitz, Carl E. Walsh, Economics, 3rd ed.,Renmin University of China Press, 2005. 2.Paul A. Samuelson, William D. Nordhaus, Economics, 16th ed., 1

6、998 by The MCgraw-Hill Companies, Inc.,Ten Principles of Economics,Learning Objectives: By the end of the introduction, you should understand: that economics is about the allocation of scarce resources. that individuals face tradeoffs. that meaning of opportunity cost.,how to use marginal reasoning

7、when making decisions. how incentives affect peoples behavior. why trade among people or nations can be good for everyone. why markets are a good, but not perfect way to allocate resources. what determines some trends in the overall economy.,Economy The word economy comes from a Greek word for “one

8、who manages a household. ”,A household and an economy face many decisions:,Who will work? What goods and how many of them should be produced? What resources should be used in production? At what price should the goods be sold?,Society and Scarce Resources,The management of societys resources is impo

9、rtant because resources are scarce. Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have.,Definition of Economics,Economics is the study of how society manages its scarce resources.,Economics is the study of how societies use s

10、carce resources to produce valuable commodities and distribute them among different people. (Paul A.Samuelson),Economics is the study of how people make choices under conditions of scarcity and of the results of those choices for society. (Robert H.Frank),Economists stdudy,How people make decisions.

11、 How people interact with each other. The forces and trends that affect the economy as a whole.,Ten principles of Economics,How people make decisions People face tradeoffs. The cost of something is what you give up to get it. Rational people think at the margin. People respond to incentives.,How peo

12、ple interact,Trade can make everyone better off. Market are usually a good way to organize economic activity. Governments can sometimes improve economic outcomes.,How the economy as a whole works,The standard of living depends on a countrys production. Prices rise when the government prints too much

13、 money. Society faces a short run tradeoff between inflation and unemployment.,1、People face tradeoffs,To get one thing, we usually have to give up another thing. Guns v. butter Food v. clothing Leisure time v. work Efficiency v. equity Making decisions requires trading off one goal against another.

14、,A special example of a tradeoff is the tradeoff between efficiency and equity. efficiency v. equity Efficiency means society gets the most that it can from its scarce resources. Equity means the benefits of those resources are distributed fairly among the members of society.,2. The cost of somethin

15、g is what you give up to get it.,Decisions require comparing costs and benefits of alternatives. Whether to go to college or to work? Whether to study or go out on a date? Whether to go to class or sleep in? The opportunity cost of an item is what you give up to obtain that item.,3.Rational people t

16、hink at the margin.,Marginal changes are small, incremental adjustments to an existing plan of action. People make decisions by comparing costs and benefits at the margin.,Marginal changes in costs or benefits motivate people to respond. The decision to choose one alternative over another occurs whe

17、n that alternatives marginal benefits exceed its marginal costs.,Because people make decisions by weighing costs and benefits, their decisions may change in response to changes in costs and benefits.,Family of marginal concepts,Marginal benefit (MB) Marginal cost (MC) Marginal utility (MU) Marginal

18、revenue (MR),Marginal benefit and 4.people respond to incentives,The three principles concerning economic interactions are:,1.trade can make everyone better off; 2.market are usually a good way to organize economic activity; and 3.government can sometimes improve market outcomes,The three principles that describe how the economy as a whole works are:,1.a countrys standard of living depends on its ability t