EC4101 Week 02 Lecture 01 PDF

EC4101 Wk.02 Lec.01 Types of Data: Time-Series Data: A sequence of measurements of the same variable at different points in time. Can be presented in tubular/graphical format but easy to mislead. Cross-Section Data: Records, at a point in time, the way an economic variable...

EC4101 Wk.02 Lec.01 Types of Data: Time-Series Data: A sequence of measurements of the same variable at different points in time. Can be presented in tubular/graphical format but easy to mislead. Cross-Section Data: Records, at a point in time, the way an economic variable differs across different individuals or groups of individuals. Panel Data: Record observations over multiple time periods for the same individuals or groups of individuals. Biocapacity: What the planet can provide Ecological Footprint: What we extract from the planet Ecological Deficit: Gap between nature we have and use# Economics often works on the assumption that individuals make rational choices. This tells us that we should produce something where the benefits of producing it are greater than the costs of producing it, and that we should produce goods in the least costly way for those who value them the most. Explicit Cost: Monetary Cost Opportunity Cost: Of an activity is the value of the best alternative you must sacrifice. Sunk Costs: Costs that cannot be recovered once incurred. Sunk Cost Fallacy: The misconception that the money you have already spent justifies spending more. Economic Cost = Explicit Costs + Opportunity Costs – Sunk Costs Economic Issues: Globalisation: The increasing integration of economies around the world particularly through the movement of goods, services, financial capital, knowledge and people. FDI moves wealth out of a country. Income Inequality: There is more wealth in the world each year, but it is being distributed unequally. Immigration: An increase of immigration hurts the native workers. The Digital Economy: Two sided markets. Externality: Arises if one person’s production or consumption physically affects the production or consumption of others. Automation causes job losses. Digital platforms may be becoming too big. Law of Diminishing Marginal Returns: Further increases in a variable input lead to steadily decreasing marginal product of that input. Economic Growth: Refers to the increase in the capacity of an economy to produce goods and services over time. It is measured by the rate of increase of real GDP. Comparative advantage: Having the lower opportunity cost compared to someone else. Absolute Advantage: Being the lowest-cost producer of a good. Market: A process by which households’ decisions about consumption of alternative goods, firms’ decisions about what and how to produce, and workers’ decisions about how much and for whom to work are all reconciled by adjustment of prices. Command Economy: A government planning office decides what will be produced, how it will be produced and for whom it will be produced. Detailed instructions are then issued to households, firms and workers. E.g. North Korea. Free Markets: Markets in which governments do not intervene. Invisible Hand: The assertion that the individual pursuit of self-interest within free markets may allocate resources efficiently from society’s viewpoint. Mixed Economy: A system in which the government and private sector jointly solve economic problems. The government influences decisions through taxation, subsidies and provision of free services such as defence and the police. It also regulates the extent to which individuals may pursue their own self-interest. E.g. Ireland. State Capitalism: Where most of the production is done by state owned companies but the allocation of resources is done by markets, e.g. China. References: Notes based on EC4101 Lecture Slides and the relevant readings from Economics (12th Ed.) David Begg.