Introduction to

Economics @ EFA 3

Introduction/Review Principles of Economics,

Microeconomics

Welcome

Prof. Dr. Peter Schmidt

WHY

study

Economics ?

What‘s it about ?What do you know? What do you expect?

EnvironmentEnvironment

BusinessBusiness

Introductions . . .

Economics

Lecturer

Students

Module Description: Learning Outcomes

Module Description: Contents

Economics & Statistics

ZEWZentrum für EuropäischeWirtschaftsforschung -

Mannheim

Peter SchmidtWho am I

market . research . culture

You are highly motivated students have to carry your individual workload:

schmidt-bremen.de

Aulis group

(10) Principles of

Economics

Every field of study has its own terminology

Mathematics

axiomsintegrals

vector spacesPsychology

egoid

cognitive dissonanceLaw

torts

venues

Promissory estoppel

Every field of study has its own terminology

Economics

Supply

Demand

Elasticity

Consumer Surplus

Comparative advantage

Opportunity cost

Deadweight loss

Economics trains you to. . . .

Think in terms of alternatives. Evaluate the cost of individual and

social choices. Examine and understand how

certain events and issues are related.

The Economist as a Scientist

The economic way of thinking . . . Involves thinking analytically and

objectively. Makes use of the scientific method.

The Scientific Method

Uses abstract models to help explain how a complex, real world operates.

Develops theories, collects, and analyzes data to prove (or dismiss) the theories.

Observation, Theory and More Observation!

Ten Principles of Economics

Chapter 1

Copyright © 2001 by Harcourt, Inc.

All rights reserved.   Requests for permission to make copies of any part of the

work should be mailed to:

Permissions Department, Harcourt College Publishers,6277 Sea Harbor Drive, Orlando, Florida 32887-6777.

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 society’s resources is important because resources are scarce.

Scarcity . . .

. . . means that society has limited

resources and therefore cannot

produce all the goods and services

people wish to have.

Economics

Economics is the study of

how society manages its

scarce resources.

1. People face tradeoffs.

“There is no such thing as a free lunch!”

Economists study. . .

I How people make decisions.(principle 1-4)

How people interact with each other. (principle 5-7)

The forces and trends that affect the economy as a whole. (principle 8-10)

Ten Principles of Economics

1. People face tradeoffs.

2. The cost of something is what you give up to get it.

3. Rational people think at the margin.

4. People respond to incentives.

I How People Make Decisions

5. Trade can make everyone better off.

6. Markets are usually a good way to organize economic activity.

7. Governments can sometimes improve economic outcomes.

II How People Interact

Ten Principles of Economics

Ten Principles of Economics

8. The standard of living depends on a country’s production.

9. Prices rise when the government prints too much money.

10.Society faces a short-run tradeoff between inflation and unemployment.

III How the Economy as a Whole Works