Sustainable Economics Course Overview

Sustainable Economics

• Vilnius University Business School is offering a course on Sustainable Economics
• The course covers assessment strategies, microeconomics, macroeconomics, and international economics/trade.
• Assessment includes a mid-term exam on Microeconomics (November 21), a mid-term exam on Macroeconomics, International Economics, and Trade (December 5), and a business challenge (January 9).
• The course will cover principles of economics, 3rd edition, (Greenlaw, Shapiro, & MacDonald, 2022)

Introduction to Sustainable Economics

• Assessment strategy includes a mid-term exam of Microeconomics (November 21), a mid-term exam of Macroeconomics, International Economics, and Trade (December 5), and a Business Challenge (January 9).
• The overall weight for assessment is 100%
• Microeconomics constitutes 30% of the assessment
• Data extraction and visualization accounts for 5% of the assessment
• Macroeconomics, International Economics, and trade account for 35% of the assessment
• Business challenge comprises 30% of the assessment.

Principles of Economics 3e

• The textbook used is "Principles of Economics 3e" by Greenlaw, Shapiro, and MacDonald (2022).
• The book is available online at https://openstax.org/details/books/principles-economics-3e

Welcome to Economics!

• The course will be covering What is economics, and why is it important?
• Microeconomics and macroeconomics
• How economists use theories and models to understand economic issues
• An overview of economic systems

What Is Economics, and Why Is It Important?

• Economics is the study of how humans make decisions in the face of scarcity.
• Scarcity means human wants for goods, services, and resources exceed what is available.
• Examples of scarcity include critical goods and services—not everyone has access to them.
• Resources are used to gain goods and services and people must make decisions on how to use them

The Problem of Scarcity

• Discussion question: What are examples of critical goods and services? Does everyone have them? How do you get those items?
• Choices must be made when resources are used to obtain goods and services
• Resources must be used efficiently
• People must decide if production will meet all their needs or if trading will be necessary.
• Division and specialization of labor is needed to increase production

Comprehensive Study of Economics

• Adam Smith introduced the idea of dividing labor into discrete tasks in his 1776 book, "The Wealth of Nations."

The Division of and Specialization of Labor

• Division of labor is the way workers divide required tasks to produce a good or service.
• Workers on an assembly line illustrate division of labor

Why the Division of Labor Increases Production

• Dividing and subdividing tasks increases output for production
• Specialization occurs when workers or firms concentrate on specific tasks they are good at.
• Specialization allows workers to become quicker and more proficient
• Specialization leads to economies of scale where increased production decreases per unit cost
• Specialization only works when workers' wages enable them to buy the things they need.

Microeconomics and Macroeconomics

• Microeconomics is concerned with the well-being of everyone including people with jobs or no jobs and high or low incomes.
• Microeconomics focuses on the individual actions of households, workers, and businesses.
• Macroeconomics focuses on broad issues such as economic growth, unemployment, inflation, and trade balance.

Other Economic Terms

• Monetary policy involves altering interest rates, credit availability, and borrowing.
• Monetary policy is determined by a nation's central bank.
• Fiscal policy involves government spending and taxes.
• Fiscal policy is determined by a nation's legislative body.

How Economists Use Theories and Models to Understand Economic Issues

• John Maynard Keynes was a highly influential economist.
• Keynesian economics teach understanding rather than just facts
• Economists use theories and models based on human behavior assumptions to analyze economic issues and problems.

Economic Theories and Models

• A theory is a simplified representation of how variables interact.
• Theories aim to simplify complex real-world issues into understandable essentials.
• Theories must be complex enough to demonstrate key features.
• Models test theories, and the terms model and theory are used interchangeably in the syllabus.

Circular Flow Diagram

• The circular flow diagram depicts how households and firms interact via goods/services markets and labor markets.
• Households receive goods/services and pay firms, and firms pay households for labor.

How Economies Can Be Organized: An Overview of Economic Systems

• Traditional economies are based on agriculture, and practices are inherited and unchanged.
• Traditional economies are common in parts of Asia, Africa, and South America and occupations are focused within families.

An Overview of Economic Systems

• Command economies have a controlling government.
• The government controls what is produced, prices, and the methods used to produce products.

An Overview of Economic Systems

• Market economies are decentralized.
• Individuals/groups own resources.
• Businesses use demand and supply to provide goods/services as buyers and sellers interact.
• Market forces (not governments) determine economic decisions.

Real World Economies

• Most economies are mixed; combining different economic systems (command, traditional, and market).
• The U.S. economy is geared toward the market-oriented end of the spectrum.
• Countries in Europe and Latin America tend to have more government involvement than the U.S.
• China and Russia tend to have more command-oriented economies compared to market-oriented economies.

Regulations: The Rules of the Game

• There is no truly free market; regulations always define economic rules.
• Market-oriented economies typically have fewer regulations.
• Heavily regulated economies may have underground economies (black markets) where transactions occur without government approval.
• Balancing market freedom with appropriate government rules is key in many economies

The Rise of Globalization

• Globalization is the increasing trend of buying/selling across national borders.
• Exports are domestically produced goods sold abroad.
• Imports are goods/services produced abroad that are sold domestically.

Self-Check Questions

• Includes questions dealing with scarcity, economic decision-making, economic systems, and the effects of globalization.