Lecture 1: An Introduction to

Economics
What will be considered in this unit?
 What is economics?
• A set of frameworks for analysing the
interaction of individuals, groups,
governments and countries in relation to the
exchange of goods, services, money and
information.
• Economics is another perspective on
individual and social behaviour
• It is a social science that sometimes uses
techniques derived from the sciences
Economics & the knowledge tree
Philosophy

Politics Natural sciences

Economics Psychology
Biology
Maths
Physics
 Economists in Action
• Macro-economists: Studying national economies
– advising governments
– private financial market advice
• Micro-economists: Studying particular markets
– labour economists
– natural resource economists
– social economists (eg the economics of crime)
 Purpose of the unit
• To introduce the basic frameworks
• To introduce you to the ‘economic way of
thinking’
– ‘How would an economist analyse this issue?’
• To familiarise you with the language
• To develop the capacity to interpret basic
economic data
If you understand economics you have
the potential to:
• Better understand the factors that most affect
businesses
• Better understand human behaviour
• Anticipate economic trends, such as interest rate
and the share market
• Make better choices in your private and work
lives
• Make better use of knowledge gained in
other disciplines
 The Level of This Unit
• A lot of assumptions and simplifications are
used in order to get to basic concepts
• Concepts reflect tendencies in the ‘real
world’ but do not explain every detail
• Focuses on mainstream economics
– There is considerable debate on many ideas
• Later units explain and qualify more of the
assumptions
Some of the Ten Principles
 1. Decisions mean trade-offs
• Individuals
– Time, money & life choices
• Business
– Expenditure, product, investment
• Governments
– Equity vs efficiency
– Taxations vs welfare
– Freedom vs regulation
 2. Opportunity Cost
• The true cost of a decision is what you ‘give
up’
• True cost = explicit cost (money outlayed)
+ implicit cost (things you forego)
 3. Rational people think at the
margin
• Modern microeconomics is based on the
idea of considering the next step
– The satisfaction gained from consuming one
more item (marginal utility)
– The cost of producing one more item (marginal
cost)
– Don’t focus on average costs or returns or sunk
costs
• The economics of the ‘next step’
4. People Respond to Incentives
• Examples
– Lower income tax & higher consumption
– Higher sales tax on cigarettes & lower
consumption
• But, beware the unintended consequence
– Eg increased garbage dump prices & littering
5. The ‘universal’ benefits of trade
• Specialisation in production and trade leads
to a net increase in available goods
• The basis of industrial modernisation
 6. Markets are a good way to
organise economic activity
• Freedom of consumption & production
• Relatively efficient exchange system
• Consumer demand is the key market signal
 7. Governments can sometimes
improve markets
• Market failure
– Externalities (eg pollution)
• Public goods (eg defence)
• Social decisions
• Monopoly or unfair power relationships
Thinking Like an Economist
 Economist as Scientist
• The Use of Assumptions
– eg Consumption behaviour
– Stock market behaviour
• Theories
• The Use of Models
• Observation & Data collection
An Example of an Economic
Model
 The Circular Flow
• A mind map for thinking about the
economy
• Identifies the economists’ ‘building blocks’
• Differentiates goods and factor markets
• Shows the economy as an interconnected
system
 Factor Markets
Factors of Firms’
Production Expenditures

Households’ Factors of
Income Production

Households Firms

Goods & Firms’

Services Incomes

Household Goods &

expenditure Services
Product Markets
 Economic Sectors
• Firms
• Households
• Government
• Overseas
– replicates each of the other sectors
• Known as the four sector model
 The Economist as Policymaker
• National accounting
• Studying economic trends
– Warnings and implications
• Analysing policy options
• Estimating the ‘true’ cost of actions
 Statements
Positive vs Normative
• A description of ‘what • A comment on ‘what
is’ ought to be’
• ‘Taxes for the
wealthiest 20% of the
population have • ‘The rich should be
increased in the last 5 taxed in order to
years.’ provide money for the
• * May be incorrect but poor.’
still positive.
Applied economics influences:
• Interest rates
• Exchange rates
• Industry assistance
• Taxation levels
• Allowances and benefits (eg Austudy)
• Trade rules
 Reading
• Stonecash et al. (text) Chapters 1, 2 &
Appendix in Chapter 2, for discussion of
graphs in economics

• Hakes & Parry (study guide) Chapters 1, 2

Self-Test (Hakes & Parry): Chapter 1
• Match all Terms & Definitions
• Do both Practice Problems
• Do Short Answer Questions
– 2, 4, 5, 7, 8, 9, 10, 11 & 13
• Do all True/False Questions
• Do Multiple Choice Questions
– 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 16, 17, 18, 19
• Make notes to answer Advanced Critical Thinking
– Questions 1 to 4
• Check answers in guide and revise accordingly
Self-Test (Hakes & Parry): Chapter 2
• Match all Terms & Definitions
• Do Practice Problems 1, 2, 3 & 4
• Do Short Answer Questions
– 3, 4, 5, 6, 7, 8, & 10
• Do all True/False Questions
• Do Multiple Choice Questions
– 1, 2, 4, 5, 6, 7, 8, 10, 12, 13, 14, 15, 16, 18 & 19
• Make notes to answer Advanced Critical Thinking
– Questions 2, 3 & 4
• Check answers in guide and revise accordingly
Course information
 Lectures
• Notes available in advance
– USQconnect
• Study desk
• Overview of main themes
• Explanation of notes
• Assessment tips
 Economics Workshops
• 2 hour session with 2 segments
– 1. Peer assisted Learning
– 2. Tutorial
• Workshops start tomorrow (Friday)
• Changes to workshop (tute) registration are to be
made only through unit leader
• Changes in tute enrolment only to those that are
not full
– Reviewed as places become available
 Workshop offerings
• 10 workshops based on full enrolment
• Some may eventually be phased out
• Depending on attendance
• All tutes are on from tomorrow until further
notice
 Responsibilities
• Lecturer deals with
– All administrative arrangements
– Complaints and concerns
– marking moderation
• Tutors:
– elaborate on main concepts and techniques
– mark assignments
– address content-related questions
 Responsibilities (cont.)
• PALS (Peer Assisted Learning) Leaders
– Develop study skills
– Prepare students for assessment
– Conduct activities to facilitate learning
– They do not deal with admin or assessment
issues
 Class behaviour
• Consideration for others in lectures &
workshops
• Civility & politeness
• Completing assigned work
• Switch off mobile phones in class
 Assessment
• 2 Web Tests
– based on any notes or discussion from lectures,
tutorials or PALS & activities set in tutorials or
PALS
– 25 multiple choice questions
– Tests open 5pm-8pm
• Test 1 Wednesday April 16
• Test 2 Wednesday May 28
– You must complete test in one attempt
• Once you start you must complete & submit
• Assignment
– Topic on Study Desk site or External study
intro book
– Due May 9
 Exam
• 30 Multiple Choice
• 5 Short Answer questions
• 2 Extended response (small essay)
• Largely based on the recommended
exercises and questions from the study
guide (Hakes and Parry)
 News and announcements
• USQconnect
– ECO 1000 study desk
• Announcements
• Assessment
• Discussion
• Unit leader monitors discussion
 Consultation
• Geoff Cockfield
– Monday: 1-4 (unavailable March 24)
– Thursday 2-5
– After lectures for admin issues and questions
arising from the lecture
– Other times available strictly by appointment
only
• Tutors
– to be announced in Tutes