Lecture 1
Dominika Milczarek-Andrzejewska
The Nature and Method of
Economics
Introduction
• Office hours: Thursday 16.45-17.45, room
401
• E-mail: milczarek@wne.uw.edu.pl
• http://www.ekonpol.wne.uw.edu.pl
• Required Textbook: C.R. McConnell and
S.L. Brue, Economics
• Written exam: multiple choice and open
questions
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Course outline:
1. Nature and Method of Economics
2. Economics as Social Science
3. Principles of Economic Methodology
4. Economic Systems
5. The Economizing Problem
6. Consumer Behaviour
7. The Costs of Production
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Course outline:
8. Market Equilibrium
9. Market Failure and Externalities. Economic Role
of Government
10. Macroeconomics - Basic Concepts
11. Economic Growth and Economic Development
12. Employment and Unemployment. Human and
Social Capital
13. International Economics and World Economy
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Outline of Lecture 1
• The Economic Perspective
– Scarcity and Choice
– Rational Behaviour
– Benefits and Costs
• Why Study Economics?
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Definition of Economics
Economics is the social science
concerned with the efficient use of
scarce resources to achieve the
maximum satisfaction of economic
wants.
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Definition of Economics
Economics allows to answer very
important questions:
– What to produce?
– How to produce?
– For whom?
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Definition of Economics
Origins of the term:
• Directly from Old French word economie
meaning “management of a household”
• Adopted from Latin word oeconomia and
Greek word oikonomia (Oikos meaning
house and –nomos meaning managing)
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The Economics Perspective
• SCARCITY & CHOICE
• We „can’t have it all” – decision what we
will have and what we must forgo
• “There is no free lunch”
• alternative use of resources: land,
capital, labor
• opportunity costs – to get more of one
thing you forgo opportunity of getting
something else
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The Economics Perspective
• RATIONAL BEHAVIOR
Pursuing opportunities to increase utility
UTILITY “Pleasure, happiness, satisfaction”
Individuals weigh costs and benefits – their
decisions are „rational” (not „random”)
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The Economics Perspective
• RATIONAL BEHAVIOR
• Different choices under different
circumstances
• Different choices made by different people
(different preferences)
self-interest ≠ selfishness
• helping family
• contributing to charities
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The Economics Perspective
MARGINAL ANALYSIS
Marginal Benefits & Marginal Costs
Choices involve changes in the status quo
“Marginal” means “extra”, “additional” or “a
change in”
For example:
• Should you study an extra hour for an exam?
• Should government increase or decrease funding for
education?
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Why Study Economics
Most of the ideologies of the modern world have
been shaped by prominent economists of the past:
• Adam Smith
• David Ricardo
• John Stuart Mill
• Karl Marx
• John Maynard Keynes
• plus many modern contributors...
For example, the president of United States benefits from
the recommendations of his Council of Economic Advisors
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Why Study Economics
Economics for Citizenship
Most of today’s political problems have important
economic aspects.
For example:
• What level of taxes should we have?
• How can we reduce poverty?
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Why Study Economics
Professional & Personal Applications
Improvement of analytical tools necessary for business
and personal needs.
For example:
• Is it more economical to buy or lease a car?
• Last but not least: studying economics as an
investment
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Lecture 2
Economic Methodology
• Economics and Other Sciences,
• Theoretical Economics and Policy
Economics,
• Macroeconomics and Microeconomics
• Positive and Normative Economics
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