Introduction to Economics

Review

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History of Economics

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ECONOMICS << Ancient GreekOikonomia : Management of a household or estateOikos : HouseholdNomos : Law

ARISTOTLE, XENOPHAN, CHANAKYA, QIN SHI HUANG, THOMAS AQUINAS, IBN KHALDUN (14th – 17th centuries)

ADAM SMITH (1776) >> "an inquiry into the nature and causes of the wealth of nations“

KEYNES (1936)>> The General Theory of Employment, Interest and Money

Adam Smith

John Maynard Keynes(right)

Silsilah Ilmu Ekonomi

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Quesnay, 1758

Adam Smith, 1776

17th and 18th

century

David Ricardo, 1817

T. R. Malthus, 1798

K. Marx, 1867V. Lenin, 1917

China

U.S.S.R and East Europe

J. M. Keynes, 1936

J. S. Mill, 1848

Walras, Marshall, Fisher,

1880 - 1910

ALIRAN ILMU EKONOMI UTAMA MODERN

Masa TransisiIlmu Ekonomi

?? ?

MADZHAB KLASIK

Kaum Fisiokrat Kaum Merkantilis

ALIRAN SOSIALIS

ILMU EKONOMI NEOKLASIK

Source:Rosyidi, S. (1996)

Definition of Economics

ECONOMICS

>>> SCARCE RESOURCES

>>> CHOICES

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Why Study Economics?

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• To learn a way of thinking– Opportunity cost

– Marginalism

– Efficient markets – no free lunch

• To understand society

• To understand global affairs

• To be an informed citizen

Approach to Economics

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• Positive Economics to understand, no judgement

to describe what exist & how it works

• Normative Economics / Policy Economics to analyzes outcomes, evaluates, prescribes

courses of action

Positive Economics

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• Descriptive Economics Compilation of data that describe phenomena & facts

• Economics Theory Compilation of data that describe phenomena & facts

Statement / set of related statements about cause & effect, action & reaction

Economics Theory

• Model– Types: Words, Graphs, Equation– Consists of: Variables– Variable <<< Ceteris Paribus– Caution!!!

• Post hoc fallacy correlation does not imply causation

• Fallacy of composition what is true for a part actually not always true for whole

• Empirical economics To test Economics Theory Example: Research in Trust & Gender Behavior Read and Summary (homework1)

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Economics Policy

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• Set objective

• 4 criteria in judging economic outcomes: Efficiency, produce what people want at the least cost

Equity (fairness), distribution of income & wealth

Growth, increase of total output of an economy

describe relationship of: output growth & population growth

Stability, growing steady + low inflation + full employment resources

The Economic Problem:Scarcity and Choice

“human wants are unlimited but resources are not”

Basic questions:• What?• How?• Who?

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Scope of Economics

• Microeconomics Trees

• Macroeconomics Forest

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Microeconomics

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PERFECTLY COMPETITIVE MARKET

Equilibrium in Competitive Output Markets

Household Behavior•Demand•Supply

Firm Behavior•Demand•Supply•Choice of Tech.

Competitive Input Markets

The Competitive Market System•General equilibrium and efficiency

MARKET IMPERFECTIONS AND

THE ROLE OF GOVERNMENT

•Imperfect Market Structure

•Public goods, social choice

•Income dist. & poverty

•Public Finance

Macroeconomics

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The Goods-and-Services Market

The Money Market

Connection between The Goods-and-Services Market and The Money Market

Aggregate Demand

Aggregate Supply

The Labor Market

References

• Case, K., Fair, R., & Oster, S. M. (2010). Principles of Economics, 10th Editions. Prentice Hall Business Publishing.

• Salvatore, D., & Diulio, E. (2003). Principles of Economics. McGraw Hill.

• Rosyidi, S. (1996). Pengantar Teori Ekonomi. Jakarta: Rajawali Press.

• Wikipedia. (2012). Article: Economics. http://en.wikipedia.org/wiki/Economics.

• Buchana, N.R., et al. (2008). Trust and gender: An examination of behavior and beliefs in the Investment Game. Journal of Economic Behavior & Organization 68,466–476.

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