Course leader:Arne Eide

1
Introduction
SOK-3551 IFM Basic Economics

• Course leader Arne Eide
• Textbook
• Economics, 8th edition,by David Begg,Stanley
  Fischer and Rudiger Dornbusch
• Available at Akademisk Kvarter(University book
  store)

2
What is Economics?
SOK-3551 INTRODUCTION

• Economics is the study of
• Production
• Distribution
• Consumption
• of goods and services

3
Topics in Economics
SOK-3551 INTRODUCTION

• Studies in Economics may answer questions like
• What is reflected in a price?
• What is profit and economic rent?
• How does a monopoly establish?

4
Two approaches
SOK-3551 INTRODUCTION

• Positive economicsConsequences of different
  choices (given a set of assumptions)
• e.g. if a tax is imposed on a good its price will
  tend to rise
• Normative economicsPrescribes a certain route
  of actions
• e.g. a tax SHOULD be imposed on tobacco to
  discourage smoking

5
Two branches
SOK-3551 INTRODUCTION

• MicroeconomicsThe study of the economic
  behaviour of individual consumers, firms, and
  industries and the distribution of production and
  income among them. It considers individuals and
  firms both as suppliers of labour and capital and
  as the ultimate consumers of the final product.
• MacroeconomicsThe study of the entire economy in
  terms of total amount of goods and services
  produced, total income earned, the level of
  employment of productive resources, and the
  general behaviour of prices. Macroeconomics can
  be used to analyse how best to influence policy
  goals such as economic growth, price stability,
  full employment and the attainment of a
  sustainable balance of payments.

6
Course structure Microeconomics
SOK-3551 INTRODUCTION

• Positive economics
• Consumer theory
• Production theory
• Market theory
• Normative economics
• Welfare economics

7
Course structure Macroeconomics
SOK-3551 INTRODUCTION

• Development economics, economic growth
• Other selected topics in macroeconomic

8
Course structure Business economics
SOK-3551 INTRODUCTION

• Project evaluation methods
• Accounting terms
• (In November, by Gunnar Ottesen)

9
Final Exam
SOK-3551 INTRODUCTION
6 hours written examination on December 9 Other
evaluation methods At least one term paper
during the semester compulsory seminar exercises
10
SOK-3551 INTRODUCTION
What is Economics?

• ECONOMICS ...is the study of how society
  decides
• What
• For whom
• How

to produce...
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The price of oil
Tripled in1973-74,and doubled again in
1979-80 andaffected people all over the world.
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An increase in the price of oil affects

• What to produce
• less oil-intensive products
• How to produce
• less oil-intensive techniques
• For whom to produce
• oil producers have more buying power, importers
  have less

13
The distribution ofworld population and GNP, 2000
14
Scarcity forces choices to be made

• Opportunity cost
• a crucial concept in economic analysis
• the quantity of other goods that must be
  sacrificed to obtain another unit of a good

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The production possibility frontier (1)

• For each level of the output of one good, the
  production possibility frontier shows the maximum
  amount of the other good that can be produced.

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The production possibility frontier (2)
?F/?G opportunity cost (1/2)
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The operation of markets

• Market
• a shorthand expression for the process by which
• households decisions about consumption of
  alternative goods
• firms decisions about what and how to produce
• and workers decisions about how much and for
  whom to work
• are all reconciled by adjustment of prices

18
Resource allocation

• Resource allocation is crucial for a society
• and is handled in different ways in different
  societies, e.g.
• Command economy
• Mixed economy
• Free market