Core Economic Ideas

• This learning module includes videos with narration, essential for understanding content.

Core Economic Ideas

• Economics examines how people and societies choose to allocate scarce resources to satisfy unlimited wants.
• Economics interacts with various disciplines and addresses real-world issues.
• Rational individuals respond to economic incentives when making decisions.
• Marginal analysis is the comparison of marginal benefits and marginal costs.
• Efficient allocation of resources is the focus of economics, and the study of how people make choices.
• Economics also answers the questions of how economy deals with pollution, why international trade happens and how to deal with it, and effects of government controls.

Scarcity and Trade-offs

• Scarcity arises when wants exceed available resources.
• Resources include land, water, minerals, labour, capital, and entrepreneurial ability.
• A trade-off exists because, due to scarcity, producing more of one thing means producing less of another.
• Choices revolve around "What" goods/services to produce, "How" to produce them, and "Who" receives them.
• Economists use opportunity cost to make alternative options

Economic Systems

• A market is a group of buyers and sellers of a good/service that come together to trade.
• Opportunity cost is the value of the next best alternative.
• Centrally planned economy: The government controls resource allocation.
• Market economy: Household and firm decisions in markets allocate resources.
• Consumer sovereignty: Consumers ultimately decide which goods/services are produced in a market economy.
• Mixed economy: Most economic decisions come from market interactions, but the government plays a role in resource allocation.

Efficiency and Equity

• Productive efficiency: achieving the least amount of resources
• Allocative efficiency: Reflecting preferences where marginal benefit equals marginal cost (MB=MC)
• Dynamic efficiency: Ongoing innovation.
• A fair distribution of economic benefits is Equity with efficiency, which may not always be equitable.
• Voluntary exchange betters both buyer and seller, and is made off by the transaction.

Economic Modelling

• Economic models used by economists are simplifications of reality, used for analysis.
• They employ economic variables
• The involve behavioural assumptions about the motives of firms/people.
• Economic variables are measurable phenomena for analyzing/impacting economic performance.
• The cost of borrowing money or the rate of inflation are examples of economic variables
• To develop economic models assumptions are decided; testable hypothesis formulated; data is used; models revised if necessary; revised models retained for similar questions
• Causation is the direct, measurable impact of one event on another
• Correlation is the apparent relationship between two or more things.
• Spurious correlations feature misleading patterns that mislead.
• Positive analysis: based on facts, objective, and descriptive and can be tested or been
• Normative analysis: based on opinions, subjective, and prescriptive cannot be tested or proven

Economic Issues

• Economics is a social science that considers motivations, human behavior, and the impact of economic decisions
• Economics is often central to policy debates, blending positive/normative elements like immigration.
• Microeconomics studies choices of firms/households, their market interactions, and government influence.
• Macroeconomics examines the economy as a whole, covering inflation, unemployment, and economic growth.
• Economics explores what jobs survive automation, AI, and offshoring.
• Automation/offshoring could increase wages, or result in job losses.