F. Girod – PLA 12 (2012)
Introduction
But the honest truth is that what drives me as an
economist is that economics is fun.
Paul Krugman
Princeton, USA
Expectations
What can you expect from me?
• Decent quality of material & my lectures
• Subject-orientated support & assistance
• Fair treatment
• Information concerning lectures on time via „the blog and
twitter“
FOLLOW ME
criticalstudents.wordpress.com
@criticalstud
Expectations (2)
What I expect from you:
• Work in advance & take part in discussions
• Respect your fellows
• Fair treatment
• Let me know what bothers you !
• Feedback at the end of each lesson
The last 2 minutes
Please note down the last 2 minutes what you got or
what the muddiest point was
Personal hints
• Use the slides for notes
• Don’t write down everything – better listen & discuss
• Read a serious newspaper!
• Discuss the content with fellows
• Start learning early enough!
Why Economics
Structure of the course
Specific topics
Money
Some concepts
General assumptions
Agro Economics
Basics “Bigger picture”
Terminology
Market
Int. Trade
Supply and demand
Micro
Macro
Learning goals
At the end of this course you should be able
• …to apply the principles from economics on most
problems / situations you will phase in your work life
e.g. judging the effect of a price policy on your
business
•
to critically analyse (&judge personally for yourself)
discussions about economic topics in business and
politics
Introduction
Fun with economics
Introduction
Objectives of this course
• What is economics about?
• Why should we know something about economics?
• Get to know the basic principles, theories and tools
used by economists
Introduction
Why learn macroeconomics?
Each one-point (1% point) increase in the unemployment rate
is associated with (in the U.S.):
–
–
–
–
–
–
920 more suicides
650 more murder
4000 more people admitted to state mental institutions
3300 more people sent to state prisons
37,000 more deaths
increases in domestic violence & homelessness
Introduction
The questions economists ask
• Why does the cost of living keep rising?
• Why are millions of people unemployed, even when
the economy is booming?
• What causes recessions? Can the government do
anything to combat recessions? Should it?
Introduction
Introduction
F. Girod – PLA 12 (2010)
Introduction
…and the end of the semester…
…you will know about…
…basic theories, principles & tools of economics as well
as institutions…
…to understand and manage external
developments in your future career…
Introduction
Feel free to use any appropriate books! Ask
me whether a book is suitable or not
Literature
Basic readings & supporting your learning
Mankiw, N. G. (2010), Macroeconomics, 7th Edition
Krugman, P., Wells, R., Graddy, K. (2009), Economics, 2nd
Edition
More than that...
Use full links and sources:
1.
Basic theory: Check on iTunes  iTunes
University, espacially Jeff Caldwells
„Principles of Macroeconomics“
2.
Current topics: The Economist
3.
Blogs: the New York Times features blogs
from P. Krugman and Levitt & Dubner 
very much entertaining, critical and up-todate
The BIG picture
Interesting Questions:
What is macro- or/and microeconomics?
What is money and why is it important to define?
What is GDP and how do we measure it?
The meaning of inflation & deflation and why price stability is
preferred
What is special about the macroeconomics of an open economy, an
economy that trades goods, services and assets with other countries
Macroeconomics vs. Microeconomics
Microeconomics
focuses on how decisions are made by individuals and firms
and the consequences of those decisions.
Example: How much it would cost for a university or
college to offer a new course? (including the cost of the
instructor’s salary, the classroom facilities, the class
materials, and so on).
Having determined the cost, the school can then decide
whether to offer the course.
Macroeconomics vs. Microeconomics
Macroeconomics
examines the aggregate behavior of the economy ─ how the
actions of all the individuals and firms in the economy interact
to produce a particular level of economic performance as a
whole.
Example: Overall level of prices in the economy (how
high or how low they are relative to prices last year) rather
than the price of a particular good or service.
Economics & principles (1)
Economic Principles:
referring to the idea of "principles of economic life". Mankiw's
list of 10 principles (below) is a good example of this notion.
These are principles of how the economy works (or should
work), hence, they refer to the economy or economic actors.
Economics & principles (2)
Principles of Economics:
referring to the basic methods & concepts economists use
when doing economics, hence to economic analysis. In this
view the term "economics" refers to the discipline, not to the
economy. This type of principles is often interwoven with the
first type in the textbooks. Lists of principles of doing
economics are harder to find.
10 Economic principles (1)
How People Make Decisions
• People Face Tradeoffs.
To get one thing, you have to give up something else. Making decisions requires trading off
one goal against another.
• The Cost of Something is What You Give Up to Get It.
Decision-makers have to consider both the obvious and implicit costs of their actions.
• Rational People Think at the Margin.
A rational decision-maker takes action if and only if the marginal benefit of the action
exceeds the marginal cost.
• People Respond to Incentives.
Behavior changes when costs or benefits change.
10 Economic principles (2)
How the Economy Works as A Whole
• Trade Can Make Everyone Better Off.
Trade allows each person to specialize in the activities he or she does best. By trading with
others, people can buy a greater variety of goods or services.
• Markets Are Usually a Good Way to Organize Economic Activity.
Households and firms that interact in market economies act as if they are guided by an
"invisible hand" that leads the market to allocate resources efficiently. The opposite of this is
economic activity that is organized by a central planner within the government.
• Governments Can Sometimes Improve Market Outcomes.
When a market fails to allocate resources efficiently, the government can change the
outcome through public policy. Examples are regulations against monopolies and pollution.
10 Economic principles (3)
How People Interact
• A Country's Standard of Living Depends on Its Ability to Produce
Goods and Services.
Countries whose workers produce a large quantity of goods and services per unit of time
enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its
average income.
• Prices Rise When the Government Prints Too Much Money. When
a government creates large quantities of the nation's money, the value of the money falls. As
a result, prices increase, requiring more of the same money to buy goods and services.
• Society Faces a Short-Run Tradeoff Between Inflation and
Unemployment.
Reducing inflation often causes a temporary rise in unemployment. This tradeoff is crucial
for understanding the short-run effects of changes in taxes, government spending and
monetary policy.
10 Principles explained
Any questions left ?