Economics Propedeutics

Topics: Economics, Marginal utility, Utility Pages: 12 (590 words) Published: October 5, 2013
Miroslav Svoboda, University of Economics, Prague

About me
Department of Economics
 Administrator of the whole course
 Office hours: Tuesday 9-11, NB309
 E-mail: miroslav.svoboda@vse.cz


Structure of the course
1.
2.
3.

Introduction to the economic way of
thinking
Introduction to institutional economics
and economic policy
introduction to economic history

Study requirements
Attending lectures
 Reading recommended literature
 Passing weekly tests
 Passing final test


Weekly tests
In ISIS, from everywhere
 Content: past lectures + reading
 Duration: 1 hour
 Date and time: Fri 00:00 – Mon 23:59
 Minimum to pass 1 test: 50 %
 Minimum to pass all tests: at least three
successful tests out of any five tests in
sequence


Weekly tests – example 1
1

2

3

4

5

6

7

8

9

10

11

12

60%

50%

20%

40%

50%

80%

80%

70%

40%

50%

90%

10%

Weekly tests – example 2
1

2

3

4

5

6

7

8

9

10

11

12

60%

50%

20%

40%

50%

80%

40%

70%

40%

50%

90%

10%

Final test
Content: all lectures + reading
 Structure: e-test, 50 test questions, 1
answer correct
 Grading (best student has 100 %):


 at least 90 % = 1 (excellent)
 at least 75 % = 2 (very good)
 at least 60 % = 3 (good)
 at least 50% = 4+ (insufficient with 1 option

to retake the exam)
 less than 50 % = 4 (insufficient)

Final test dates
Friday 20th December
 Retake 1: January – 7, 15, 24, 31?
 Retake 2: February 3rd


Reading – my lectures
Paul Heyne: The Economic Way of
Thinking (selected chapters)
 Henry Hazlitt: Economics in One Lesson
 Peter Schiff: How an Economy Grows
and Why It Crashes


https://kekebooks.vse.cz
 Password: keke123


My lectures
Introduction to
the economic way of thinking
or
how economists think

Structure of human action

Man

Means

Ends

Structure of our lectures
Economic principles
 Two ideal types of human society


1. Organized economy
2. Property rights economy



Real economy (mixed)

Science

!
?



Natural science



Social science

Natural-science and
economic view of humans
Past

Present

Cause

Behavior

Circumstances


Action

Future

Goals

Circumstances + Goals = Incentives → Action

First economic axiom
People act.

Consequences of action
Intended vs. unintended
 Economics searches for both!


Second economic axiom
People live in the world of scarcity.

Definition
Economics is the science of how people
act in the world where there is scarcity.
 Economics is the science of how people
economize.


Basic terms
Good = something by means of which I can and
intend to attain my goals.
 Free good: is abundant with respect to my goals.
 Economic good: is scarce with respect to my
goals.
 Total utility = degree of fulfillment of my goals.
 Marginal utility = contribution to the fulfillment of
my goals.
 Expected marginal utility = expected contribution
to the fulfillment of my goals.


Structure of human action II.

Man

Means

Ends

Man

Goods

Utility

Action as a Choice


Acting = Choosing =
Sacrificing

 Opportunity

cost =
expected marginal
utility of the best
deferred alternative

“Costs” I.


Party?
 Pros:…
 Cons:…
 Total:…

“Costs” II.


“Costs”:
 Shoes 30 000 CZK
 Employees 40 000 CZK
 Transportation 20 000 CZK
 Total: 90 000 CZK



Benefits:
 Sales 100 000 CZK

Opportunity costs
Resources

Opportunity A
(its MU =
pros minus
cons)
≠ costs!

≠ costs!

Opportunity B
(its MU == costs!
pros minus
cons)

Exercise
“If I hadn’t chosen to study economics, I would
have chosen sociology, and not politology.”
 What does it mean? My opportunity costs
were:


 bigger than the expected utility of studying sociology
...
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