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Economics

Economics. Chapter 1 Scope of study. Method of analysis. Postulate of maximization Assumption: Everyone makes choices for self-interest. Everyone tries to maximize self-interest. Method of analysis.  All or nothing analysis Seldom happened Doesn’t make sense Not comprehensive

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Economics

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  1. Economics Chapter 1 Scope of study

  2. Method of analysis • Postulate of maximization • Assumption: • Everyone makes choices for self-interest. • Everyone tries to maximize self-interest.

  3. Method of analysis  All or nothing analysis Seldom happened Doesn’t make sense Not comprehensive  Marginal decision Comparing the marginal cost and marginal benefit Additional cost vs. additional benefit Economics suggests that a person will balance the marginal benefit and marginal cost of a choice

  4. Method of analysis • People response towards incentives • Penalties / Punishment • Institution of punishment (Smoking prohibition $1500) • Removal of rewards (Singer in the park) • Rewards • Removal of punishment/restriction (Individual visit scheme) • Providing direct or indirect rewards (Buy 1 get 1)

  5. Scope of study • Economics perspective • In what way you analyze such a phenomenon? Any guidance? • How do you draw a conclusion towards a situation? • Why are you making such a choice?

  6. Scope of study • Microeconomics • An individual person, firm or an industry. • Individual’s maximizing behaviour. • Macroeconomics • Aggregate phenomena of the economy • Price level, total output and unemployment.

  7. Scope of study • Positive statement • A statement about the real world which can be tested against facts. • E.g. • Number of tutorials on L.S. will be increased since the NSS. • The PSP consoles will be cheaper after the launched of NDSlite. • Normative statement • A statement which involves value judgments, but can’t be tested against facts. • E.g. • Teacher should give students thousands of questions to do before exam in order to help them get high marks. • The government should increase subsidy for university to provide more offers for NSS students.

  8. Try it • Which of the following is a normative statement? • More students further their studies after the implementation of free tertiary education. • The government should allocate more resources to people in need. • More people apply for financial assistance when the unemployment rate increases. • People spend less when the inflation rate rises.

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