3 1 economics 1 st term 2011
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TRANSCRIPT
01
ECONOMICS A 3-1 SUBJECT?
project date 20/09/2007
01
I want a full stomach!
I want a fur coat!
Let’s compromise…
The bear ate the man…they both got what they wanted.
Take the initiative
Fight the issue not the person
Take control of your day and life
Be decisive
Joshua 1:6-7,9
Source: JL Mason
01
GOALS
• Understand why economics is 1. Science2. Art3. Social science
• DifferentiateMicroeconomics vs.
MacroeconomicsPositive vs. Normative AnalysisTheories vs. Models
ECONOMICS is like…
Cork-can-bottle opener
Nescafe 3-1 coffee 3-in-1 printer, fax and photocopying
machine
SCIENCE
SOCIALSCIENCE
ARTS
• Economics uses SCIENTIFIC APPROACH OR METHOD in
studying economic events or phenomena
SCIENCE
“What a science (economics) does or should do is simply allow the average man to commandthe heights of a genius.” (James Buchanan)
• Uses scientific approach
• Experiments in laboratories
• Uses experimental data
• Uses statistics
• Uses scientific approach
• No experiments in laboratories; society is the laboratory
• uses real or actual data of people or non-experimental data
• Uses statistics
PHYSICAL SCIENCES ECONOMICS
ARTS
ECONOMICS AS AN ART?ECONOMICS AS AN ART?
• Art is a skill acquired by experience, discipline, study or observation
• Skill in applying economic tools or principles in real life situation
The business world could use all the art, all of the out-of-the-box thinking , all the innovative problem solving that it can find.
Creativity (art) can be integrated into every aspect of business…
SOCIALSCIENCE
ECONOMICS AS A SOCIAL ECONOMICS AS A SOCIAL SCIENCE?SCIENCE?
• It is a social science because it studies society or people in the economy
• It studies the economic behavior of man in the market
• Needed to change/improve society
MICMIC--MACMAC
MICROECONOMICS VS. MACROECONOMICS
Microscope
Telescope
WHAT’S THE DIFFERENCE?WHAT’S THE DIFFERENCE?
MICROECONOMICS MACROECONOMICS
I A
MMIIcroeconomics = croeconomics = IIndividual / ndividual / SpecificSpecific
Two major fields/divisions
1. Microeconomics = Parts, Trees
• About INDIVIDUAL economic units such as CONSUMER and FIRM, INDUSTRY,
• How they make decisions and how they interact in specific markets
• MARKET ECONOMICS
MMAAcroeconomics = croeconomics = AAggregate, ggregate, AAll , Generalll , General
2. Macroeconomics = Whole, Forest
• Studies how the economy behaves as a whole
• Country’s output, general price level, national income and employment and unemployment,
balance of payments and exchange rates
• NATIONAL ECONOMICS
MicroMicro vs vs MacroMacro
• An individual or a family decides to buy a laptop
• A firm’s production of a good
• The price of notebook, pen, etc
• All consumers’ demands for all goods
• Total production of goods of all firms
• The general price of all goods and services
3 IN 1 Science, Social Science and Art
TWO MAJOR FIELDS
Microeconomics
Macroeconomics
TWO TYPES OF ANALYSES / STATEMENTS
Positive
Normative
RED APPLE OR RED APPLE OR GREEN APPLEGREEN APPLE
POSITIVE ANALYSIS
NORMATIVE ANALYSIS
POSITIVE ANALYSIS
NORMATIVE ANALYSIS
ECONOMIST AS A SCIENTISTECONOMIST AS A SCIENTIST
• Uses POSITIVE ANALYSIS
• Uses facts and determines cause-and-effect relationships
• Develops and tests theory
• Does not use personal value judgment
• Can be proven/rejected
• Answers the basic question – WHAT IS
ECONOMIST AS POLICYMAKERECONOMIST AS POLICYMAKER
• Uses NORMATIVE ANALYSIS
Incorporates value judgment about the economy
• Recommends/prescribes policy actions to achieve desired economic change or goal
• Makes claim about how the economy OUGHT TO BE
POSITIVEPOSITIVE vs. vs. NORMATIVENORMATIVE
• WHAT IS?• Describes using facts
and numbers• Cause and effect
relationship• Uses scientific
analysis
• WHAT OUGHT TO BE?
• Prescribes or recommends policies
• Incorporates value judgment
Statement of facts Statement of values
POSITIVEPOSITIVE vs. vs. NORMATIVENORMATIVEStatement of facts Statement of values
POSITIVEPOSITIVE vs. vs. NORMATIVENORMATIVE
• WHAT IS?
• The economy has grown by 4.7% in 2008. Last year’s growth was recorded at 7.3%.
• WHAT OUGHT TO BE?
• Economic growth should be continuing and consistent so that poverty will be eliminated!
POSITIVEPOSITIVE vs. vs. NORMATIVENORMATIVE
• WHAT IS?
• The current bank lending interest rate is noted at 9.7% in 2006 from 10.2% last year.
• WHAT OUGHT TO BE?
• Interest rate ought to be low to stimulate business and investment in the country
MICROECONOMICS
MACROECONOMICS
2 Branches/ Fields 2 Types of Analyses
Positive“What is, was,
will be”
Normative“What ought
to be?”
SCIENCE
SOCIAL SCIENCE
ART“Applied
Economics”
3-1 Discipline
1-2-31-2-3
HYPOTHESIS
THEORY
LAWS OR PRINCIPLES
Statement that needs to be tested/proven
As hypothesis is proven true, it evolves into a theory
A well tested and accepted theory becomes a law or principle
THEORIESTHEORIES vs. vs. MODELMODEL
• STATEMENTS about economic behavior that enable the prediction of the probable effects of certain actions
• FORMAL STATEMENT OF A THEORY usually in the form of
• mathematical equation
• diagram or graph
THEORIESTHEORIES vs. vs. MODELMODEL
• Law of Demand states that as price of the good increases, quantity demanded falls, ceteris paribus (all else equal)
• Qd = 10 - 2P
D
P
Qd
DIVERSE FIELDS OF DIVERSE FIELDS OF ECONOMICSECONOMICS
• Urban and regional economics• Econometrics• Economic Development• Labor Economics• International Economics• Public Economics• Economic History• Many more
QUALITIES NEEDED TO QUALITIES NEEDED TO STUDY ECONOMICSSTUDY ECONOMICS
• Analytical and logical and desiring to learn just like a philosopher
QUALITIES NEEDED TO QUALITIES NEEDED TO STUDY ECONOMICSSTUDY ECONOMICS
• Can work with some numbers just like a mathematician
QUALITIES NEEDED TO QUALITIES NEEDED TO STUDY ECONOMICSSTUDY ECONOMICS
• Interest in research and knowledgeable with past and current issues just like an historian
QUALITIES NEEDED TO QUALITIES NEEDED TO STUDY ECONOMICSSTUDY ECONOMICS
• Considerate of the welfare of the people just like a statesman
Group exercise
3 ounce 5 ounce 8 ounce
The largest glass is full. What can you do to get 4 ounces of liquid into each of the larger two glasses?
LET US APPLY WHAT WE LET US APPLY WHAT WE HAVE LEARNED!HAVE LEARNED!