Content
Part I What is economics?
Part II Consumption, Production &
Exchange
Part III Market structure
Part IV Factor market
Part V Market Coordination & Efficiency
Chapter 1 Nature of Economics 1

Part I What is economics?
Chapter 1 Nature of Economics
Chapter 2 Scarcity & Competition
Chapter 3 Supply, Demand & Price
Chapter 4 Methodology of Economics
Chapter 1 Nature of Economics 2

Learning Objectives
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What is Economics?
Micro vs. Macro
Economics Policy
Chapter 1 Nature of Economics 3

Learning Objectives
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What is Economics?
Micro vs. Macro
Economics Policy
Chapter 1 Nature of Economics 4

PRODUCTION
Production of goods and services
CONSUMPTION COORDINATION
Consumption of goods and services
Coordination of production and consumption

Question
 What are economic issues?

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Unemployment
Inflation
International Trade
Falling/Rising of Prices of Residential Flats
Education
Pollution
Crime rate
Public Health
Single Parent Families
Yes!

What is Economics?
 Economics is a social science that attempts to explain and predict human behaviour within a market .
Chapter 1 Nature of Economics 9

Question
 What are the differences between natural science and social science ?

What is Economics?
 Natural Sciences are disciplines that deal with the objects, phenomena or the laws of nature and the physical world.
 Examples: biology, chemistry,and physics.
Chapter 1 Nature of Economics 11

What is Economics?
 Social sciences are scholarly or scientific disciplines that deal with the study of society and individual relationships , within it.
 Examples: sociology, psychology, anthropology, economics, political science and history.
Chapter 1 Nature of Economics 12

Question
 What is the major characteristics of a
‘science’ subject?

What is Economics?
 Science use scientific models and theories to make predictions and explaining phenomena.
Chapter 1 Nature of Economics 14

What is Economics?
 There are 2 major problems faced by social scientists or economists:
1. It is difficult or impossible to conduct a controlled experiment .
2. Human behaviour can be distorted by human will .
Chapter 1 Nature of Economics 15

Learning Objectives
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What is Economics?
Micro vs. Macro
Economics Policy
Chapter 1 Nature of Economics 16

Micro vs. Macro
 Economics is traditionally divided into two main branches:
– Microeconomics
– Macroeconomics
Chapter 1 Nature of Economics 17

Micro vs. Macro
 Microeconomics is concerned with individual decisions, and the units of investigation are individuals in the economy.
 Macroeconomics is concerned with the economy as a whole. It is the study of economic aggregates such as unemployment, inflation, growth and the balance of payments.
Chapter 1 Nature of Economics 19

Learning Objectives
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What is Economics?
Micro vs. Macro
Economics Policy
Chapter 1 Nature of Economics 20

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Unemployment
Inflation
International Trade
Falling/Rising of Prices of Residential Flats
Education
Pollution
Crime rate
Public Health
Single Parent Families
Yes!

Example
 Should the government increase the places of university?
 Do we have enough money to finance the additional university places during recession?
 Shall we raise the school fee?

Economics Policy
 To answer those questions, we have to differentiate 2 different types of issues:
– Normative issue
– Positive issue
Chapter 1 Nature of Economics 23

Economics Policy
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Normative statement is a statement of value .
It is a statement about what ought to be or ought not to be, about whether something is good or bad, desirable or undesirable.
 Examples: you should keep quiet in the classroom, you are pretty.
Chapter 1 Nature of Economics 24

Economics Policy
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Positive statement is a statement of fact .
It can be right or wrong, and its validity can be verified by appealing to facts .
 Examples: this is a blackboard, you get 80 marks in your examination
Chapter 1 Nature of Economics 25

Issue
The government should reduce the unemployment rate.
The unemployment rate will increase if the government raises the tax rate.
The price will rise if the supply decreases.
The oil prices should be lower.
Normative Positive
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Issue
The government should reduce the unemployment rate.
The unemployment rate will increase if the government raises the tax rate.
The price will rise if the supply decreases.
The oil prices should be lower.
Normative Positive
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