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Economics Lecture Economics Lecture 1 1

Economics Lecture Economics Lecture 1 1

2007 Economics Dept2007 Economics DeptMr Lim Peng YeowMr Lim Peng Yeow

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Ground Rules• PUNCTUALITY• RESPECT• CONSIDERATE

• Conducive environment for learning

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Agenda Today• Introduction

- What’s Economics?- Difference between Microeconomics & Macroeconomics- H1 & H2 syllabus & requirements- Desired outcome

• Basic Economic Problem- Scarcity

• Economic Resources• Decision-making

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What is Economics?• It is a social science – part subjective

(human behaviour) and part scientific (tools can predict fairly accurately the outcome).

• It is a part of our lives; and we practise it without knowing it!

• It is about decision-making!

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The Social vs Science aspects of

EconomicsEconomics is a social science

study of human behaviour

- how people make decisions / choices

As opposed to physical sciences:

analysing the behaviour of non-human phenomena e.g. electrons, atoms

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The social aspect of Economics

Economics is a social science

Study of human behaviourhow people make decisions

Why do we have to make decisions?

Resources are limited. We cannot satisfy all our desires.

The Central Problem of Economics - SCARCITY

??

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Economics as a science

Economics is a social science

Scientific method of inquiry

Just like in Physics and Chemistry, Economics makes use of theories or models to help us explain actual events

Interplay between theory and observation

But instead of setting up laboratory experiments, economists formulate our theories based on past events, i.e. empirical data

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What is Economics?• Most of the challenging problems being

confronted nationally and globally are economic in nature.

• Examples like rise in GST, aid for the lower income group, economic growth or recession etc.

• More examples like earthquake that affects a nation’s economic activity or even saving too much (paradox of thrift)!

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Decision-making?

• How much taxes

should be raised?

Individuals

@What should I spend my savings on this Christmas?

@Should I have coffee or tea?

Firms

@How much bonus should I give to the workers?

@Should I increase production?

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What is Economics?• When you study economics, you gain an

understanding of the essential backdrop for current social and economic issues and debate; and the frameworks and methods that are used to analyze these issues.

• The learning and skills you acquire will equip you for a wide range of jobs in the public and private sectors.

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Microeconomics?• Microeconomics is about decision-making by

individuals and firms and how resources (land/raw materials, labour, capital & entrepreneurship) are priced and allocated efficiently through markets.

• It is also about how the market mechanism (tool used to allocate) can fail and what should be done to rectify the problems encountered.

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Macroeconomics?• Macroeconomics looks at the big picture:

income ($$) and growth (%), wealth ($$) and poverty, business cycles, inflation (%) and unemployment, interest rates, exchange rates, and the balance of trade and payments.

• It examines the role for government intervention and the consequences of alternative policies that affects a certain country.

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Aims of H1 Syllabus• Concepts and principles covered should

be applied to the real world context;• Where applicable, to the Singapore

economy in Macroeconomics;• Emphasis on real world examples;• Application with opportunity to utilise

problem-solving skills to address current issues.

For Info Only

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H1 Syllabus

Microeconomics• How the Microeconomy Works• Microeconomic ProblemsMacroeconomics• How the Macroeconomy Works• Economic Performance• Macroeconomy goals

For Info Only

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Aims of H2 Syllabus• Concepts and principles covered should

be applied to the real world context;• Where applicable, to Singapore,

regional and international economies;• Emphasis on inter-connectedness of

economic concepts using real world examples;

For Info Only

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H2 SyllabusMarket System

– Scarcity, choice and Opportunity Cost– Resource allocation in competitive

markets– Firms & How They Operate

Market Failure & Government Intervention– Market Failure– Government Intervention in the Market

For Info Only

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H2 Syllabus (con’t)National & International Economy

– Key Economic Indicators– How the Macroeconomy Works– International Economics

For Info Only

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To take H1 vs H2?H1 H2

1 Exam paper 2 Exam papers

Section A (70%)Case Study (2h

15m)

Paper 1 (40%)Case Study (2h

15m)

Section B (30%)2C1 Essay (45m)

Paper 2 (60%)3 Essays (2h 15m)

Both H1 & H2 – 2 year coursework

H1 content is half that of H2For Info Only

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H1 Exam Requirement

• Section A (70%) 2 hrs 15 mins– Case Study Questions

•Candidates given 2 sets of condensed write-up on a multi-faceted economic issue or policy decision

• Section B (30%) 45 mins– Essay Questions

•Candidates are required to answer 1 out of 2 essay questions

For Info Only

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H2 Exam Requirement

• Paper 1 (40%) 2 hrs 15 mins– Case Study Questions

•Candidates given 2 sets of condensed write-up on a multi-faceted economic issue or policy decision

• Paper 2 (60%) 2 hrs 15 mins– Essay Questions 3 out of 6

•Section A (3 qns from Microeconomics)•Section B (3 qns from Macroeconomics)•Must at least answer 1 qn from each

section

For Info Only

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Desired Outcomes• An understanding of fundamental of

economic principles, and the methods of inquiry used by an economist;

• The ability to use the tools of economic reasoning to explain, analyse and resolve economic issues, and evaluate policy decisions;

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Desired Outcomes• The ability to use evidence in making

rational arguments in economic context and understand one’s role in the economic system

• Ability to read critically, from a variety of sources, to gain information about the changing economic activities and policies at the national and international levels

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Our Wish• Infusing real life experience & participative

learning (fieldtrips, case studies)• Integrating IT into teaching & Nurturing

independent learning (research, coursework)• Identify & tailor teaching & learning

(pedagogies)• Showcase students’ talents & actualize

leadership potential (Econs Website, peer teaching)

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References• Principles of Economics 3rd edn by N.

Gregory Mankiw

• Economics by John Sloman

• Economics Today by Roger Leroy Miller

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References

Resources

TPJC Home Page - Online newshttp://www.tpjc.net/

TPJC Economics Dept Website http://economics.tpjc.net/

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Recall

Economics studies • the art and science of decision-making

Why is there a need to make decisions?• Because of resources (like land, minerals

and machines) are limited we cannot have everything that we desire we have to choose & decide what we

ultimately want

The central problem ofEconomics isSCARCITY!

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• What is the economic problem facing all societies?

• scarcity because human wants are unlimited and resources are limited.

• How is society going to solve this problem?

• choose among alternative goods and therefore society has to make sacrifices.

What is Scarcity?

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• Scarcity is not:– Not a shortage– Not the same as poverty

• A pervasive condition of human existence that exists because society has unlimited wants and needs, but limited resources used for their satisfaction.

What is Scarcity?

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What are Economic Resources?

• These are the inputs necessary for production to take place

• Also known as factors of production

• They are resources that are used to produce other products

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Types of Factors of Production

Examples of FOPs:

a plot of land

iron oreworkers

machines

computers

saw

LAND LABOUR CAPITAL

the one who makes it all possible ENTREPRENEUR

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Who are the players? (Economic agents)

Households / Individuals

Businesses / Firms

Government

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Economic agents: HouseholdsSome economic decisions that households have to make:

Should I spend or should I save?Should I watch a movie or should I enjoy a meal at BK?

Should I work or stay at home as a housewife?Should I work overtime?

Households as buyers / consumers

Households as workers

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Economic agents: FirmsSome economic decisions that firms have to make:

How much output should I produce?What price should I sell my goods?

How many workers should I employ?Should I use more advanced equipment in my factory? How much raw materials should I order?

Firms as producers

Firms as buyers of factors of production

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Circular Flow

Households Firms

HHs pay firms for the g&s

Firms produce g&s to satisfy needs & wants

HHs provide factor services to firms

firms pay HHs for their factor services

Money flow

Real flow

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Decision-making

Question:• Why do we have to make decisions?• Why do we have to choose?

Answer:Because we can’t have everything!

Limited amount of moneyLimited amount of land

Limited resources

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What Decisions to make?

• What to produce?

• How to produce?

• For Whom to produce?