ECON1102 Lecture Notes - Lecture 1: Human Capital, Microeconomics, Well-Order
TOPIC 1 INTRO TO MACROECONOMICS
DEFINITION
- All economic questions arise because we want more than we can get → scarcity. Therefore, must make
choices. The choices we make depend on the incentives we face. An incentive is a reward that
encourages an action or a penalty that discourages an action.
- Economics is the social science that studies the choices that individuals, business, govts., and entire
societies make as they cope with scarcity and the incentives that influences and reconcile those choices
o Microeconomics → individuals and business.
o Macroeconomics → study of the performance of the national and global economies
TWO BIG QUESTIONS OF ECONOMICS
- How do choices end up determining what, how, and for whom goods and services get produced?
- When do choices made in the pursuit of self-interest also promote the social interest?
- What, How, and For Whom?
o G/S are the objects that people value and produce to satisfy human wants
- What?
o In Australia, agriculture accounts for 4 percent of total production, manufactured goods for
27 percent, and services for 70 percent.
o In China, agriculture accounts for 10 percent of total production, manufactured goods for 50
percent, and services for 40 percent.
- How?
o Goods and services are produced by using productive resources that economists call factors
of production.
o Factors of production are grouped into four categories:
▪ Land
▪ Labour
▪ Capital
▪ Ideas/Knowledge/Entrepreneurship
o The gifts of atue that e use to podue goods ad seies are land.
o The work time and work effort that people devote to producing goods and services is
labour.
o The quality of labour depends on human capital, which is the knowledge and skill that
people obtain from education, on-the-job training, and work experience.
o The tools, instruments, machines, buildings, and other constructions that businesses use to
produce goods and services are (physical) capital.
o The human resource that organizes land, labour, and capital is
ideas/knowledge/entrepreneurship.
- For Whom?
o Who gets the goods and services depends on the incomes that people earn.
▪ 1. Land earns rent.
▪ 2. Labour earns wages.
▪ 3. Capital earns interest.
▪ 4. Ideas/knowledge/entrepreneurship earns profit.
- CHOICES AND TRADEOFFS
o The economic way of thinking places scarcity and its implication, choice, at center stage.
o You can think about every choice as a tradeoff—an exchange—giving up one thing to get
something else
- WHAT, HOW, AND FOR WHOM TRADEOFFS
o The questions what, how, and for whom become sharper when we think in terms of
tradeoffs. (Remember the concept of opportunity costs?)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
All economic questions arise because we want more than we can get scarcity. The choices we make depend on the incentives we face. An incentive is a reward that encourages an action or a penalty that discourages an action. What, how, and for whom: g/s are the objects that people value and produce to satisfy human wants. In australia, agriculture accounts for 4 percent of total production, manufactured goods for. For whom: who gets the goods and services depends on the incomes that people earn, 1. Choices and tradeoffs: the economic way of thinking places scarcity and its implication, choice, at center stage, you can think about every choice as a tradeoff an exchange giving up one thing to get something else. Government redistribution of income from the rich to the poor creates the big tradeoff the tradeoff between equality and efficiency (or (cid:374)ot ?) Positive economics: is the study of what is.
