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Economics Analysis in Public Sector Decision Making

Learn the key issues economics addresses, scarcity management, decision-making trade-offs, and how economists perceive the world through economic analysis and the public sector. Explore market-driven vs. state allocative policies, evaluating choices objectively. Understand microeconomics tools and the circular model of economic flow.

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Economics Analysis in Public Sector Decision Making

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  1. INTRODUCTION TO PUBLIC SECTOR & ECONOMICS POLS 4358

  2. TOPICS • WHAT ARE THE KEY ISSUES ECONOMICS IS CONCERNED WITH? • ECONOMIC ANALYSIS & THE PUBLIC SECTOR • HOW ECONOMISTS PERCEIVED THE WORLD: THE CIRCULAR MODEL

  3. WHAT ARE THE KEY ISSUES ECONOMICS IS CONCERNED WITH? Scarcity management: • limitless demands and limited resources Every society faces three key questions: • What is to be produced? • TASTE & PREFERENCE • How is it to be produced? • EFFICIENCY • Who gets what? • EQUITY

  4. WHAT ARE THE KEY ISSUES ECONOMICS IS CONCERNED WITH? Every decision, made either by an individual or society, concerning the previous three questions necessarily implies an opportunity cost • An opportunity cost is essentially what you give up of X in order to obtain Y • Time • Forgone income • Resources

  5. ECONOMIC ANALYSIS & THE PUBLIC SECTOR Every society must decide how to address the above three questions and make choices. What are the choices? • Market driven vs. state allocative policy • Recently there exists a debate concerning whether the private sector can deliver more efficiently services that traditionally are governmental functions such as education, trash collection, roads, mail delivery, etc.

  6. ECONOMIC ANALYSIS & THE PUBLIC SECTOR • The objective of this class, therefore, is to be able to evaluate pros and cons of choices of market (prices) versus state driven allocative mechanisms (taxes & fees). • The analysis employed will be positive (cause & effect) rather than normative (value judgment) driven. • Microeconomics provides the theoretical tools to analyze the framework of choices.

  7. HOW ECONOMIST PERCEIVED THE WORLD: THE CIRCULAR MODEL HOUSEHOLDS FACTOR MARKET GOODS MARKET PUBLIC SECTOR BUSINESSES

  8. THE FLOW OF MONEY • HOUSEHOLD Income = salary, rent, and interest • Business Profits = Total revenue – Total costs Total costs= salary + rent + interest

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