WELCOME TO

FHBM1014 PRINCIPLES OF ECONOMICS

(Topic 1 – Introduction to Economics)

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 Main Text

Irvin B. Tucker (2017)

Economics For
Today’s World
9th edition
Publisher: Thomson
South Western
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 Method of Assessment

• Mid Term Test 15%

• Group Assignment 15%
• Group Presentation 10%
• Total Coursework 40%
• Final Examination 60%
• TOTAL 100%

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 Course Materials
• Lecture Notes
• Tutorial Questions
• Assignment Question

• Obtain from WBLE

http://wble.utar.edu.my

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 Overview

Topic 1 – Introduction to Economics

Topic 2 – The Two Simple Economics Models
Topic 3 – Market Demand and Supply (Part 1)
Topic 4 – Market Demand and Supply (Part 2)
Topic 5 – Price Elasticity of Demand and
Supply

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 Overview
Topic 6 – Concepts of National Income:
GDP and GNP
Topic 7 – Macroeconomic Problems (Part 1)
Topic 8 – Role of Government
Topic 9 – Introduction To Money and Banking
Topic 10 – International Trade and
Globalization

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 Learning Objectives
After Completion of this chapter, students
should be able to :
1.1. Understand the definition of economics and
the two main branches of economics.
1.2 Four categories of resources.
1.3 The study of scarcity( 缺乏 ), choice( 选择 ) and
opportunity costs( 机会成本 ).
1.4 Positive and normative analysis.
1.5 Basic economic problems.
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 Learning Objectives
(1.1)
Economics: Microeconomics and
Macroeconomics

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 Introduction to Economics
a) The term economics comes from a Greek
word “oikonomos” (household management)
from “oikos” (house) + “nomos” (custom or
law), hence "rules for running the household”.

b) Def: Economics is the science that studies

how individuals and groups make decisions
with scarce( 稀缺 ) (limited) resources as to best
satisfy( 满足 ) their wants, needs, and desires.

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 Introduction to Economics
c) Should economics be considered a science?
Why or why not?
Yes. Economics is the social science
studies. Economics uses models and
theories to make predictions and then tests
those predictions using empirical analysis.

d) We can break down the study of economics

into two broad categories
- Microeconomics
- Macroeconomics 10
 Two Branches of Economics
a) Micro comes from Greek word mikros,
meaning “small”.
b) Microeconomics is the branch of economics
that analyzes the decision making behavior
of firms( 公 司 ) and households( 家 庭 ) and their
interaction in markets for particular( 特 定 )
goods or services.
c) Focuses on individual parts of an economy,
rather than the whole.
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 Two Branches of Economics
d) Macro comes from Greek word, makros,
meaning “large”
e) Macroeconomics is the branch of economics
that studies the behavior( 行 为 ), decision-
making( 做 决 定 ) and performance( 性 能 ) of an
economy as a whole. It focuses on the
aggregate changes( 汇 总 变 化 ) in the economy
such as unemployment( 失 业 ), growth rate( 增 长
率 ), gross domestic product( 国 内 生 产 总 值 ) and
inflation ( 通货膨胀 )
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Learning Objectives
(1.2)
Four Categories of Resources

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 What Are Resources
a) Def: Basic categories of inputs used in the
production of goods and services.

b) Also known as factors of production (FOP).

c) Four types of resources:

- land( 土地 ),
- labour( 劳工 ),
- capital( 资本 ),
- entrepreneurship( 创业精神 ).
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 Factors of Production - Land
a) Def: Any natural resource used to
produce goods and services.

b) This includes not just land, but anything

that comes from the land - water, oil,
copper, natural gas, coal, and forests.

c) The income that resource owners earn in

return for land resources is called rent.

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 Factors of Production - Labour
a) Def: Labour( 劳 工 ) is the effort (physical
and mental) that people contribute( 有助于 ) to
the production of goods and services.
b) Exp: the work done by the waiter who
brings your food at a local restaurant as
well as the engineer who designed the bus
that transports you to campus.
c) The income earned by labor resources is
called wages( 工资 ).
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 Factors of Production - Capital
a) Def: All non-natural ( 制 造 )(manufactured)
resources that are used in the creation and
production of other products.
b) Exp: A doctor may use a stethoscope and
an examination room to provide medical
services. Your teacher may use textbooks,
desks, and a whiteboard to produce
education services.
c) The income earned by owners of capital
resources is interest( 利益 ).
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 Factors of Production - Entrepreneurship

a) Def: The creative ability( 能 力 ) of individuals

to seek( 寻求 ) profits( 利润 ) by taking risks and
combining resources to produce
innovative product( 创新产品 ).

b) The most successful entrepreneurs( 企 业 家 )

are innovators( 创 新 者 ) who find new ways
produce goods and services or who
develop( 发 展 ) new goods and services to
bring to market.
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 Learning Objectives
(1.3)
The study of scarcity( 缺乏 ), choice( 选择 )
and opportunity costs( 机会成本 )

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 Scarcity and Choice( 缺乏和选择 )
a) The problem of scarcity is regarded( 被视为 ) as the
fundamental( 基 本 的 ) economic problem arising
from the unlimited human wants in a world
where resources are limited.( 源于资源有限的世界中 人类
无限需求的产生 )
b) People are not able to fulfill( 满 足 ) all their wants
and desires( 欲望 ), material and non-material.
c) Scarcity force each of us to make choices.
d) This means each decision has a sacrifice in
terms of an alternative not chosen (opportunity
cost)( 机会成本 ).

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 Choice and Opportunity Cost
a) The next highest valued alternative that is
given up( 放弃 ) when a choice is made.

b) Can opportunity cost be something other than

money? Yes, the most desired good or service or
use of time that you are presently giving up is an
opportunity cost.

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 Opportunity Cost - Example
• A student who must decide how to allocate
her main resource – time.
( 分配 )

• Spend all the time studying economics

• Spend all the time studying maths
• Or divide time between both
• For every hour spent on one subject, she
gives up an hour for the other.
• Every hour spent studying, hour gone on
leisure( 休闲 ) or work, etc.

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Learning Objectives
(1.4)
Positive And Normative
Analysis( 积极与规范分析 )

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 Positive Statements
a) Positive statements are objective statements
that can be tested( 测试 ), amended( 修正 ) or rejected
( 被 拒 绝 ) by referring to the available evidence( 证
据 ).
b) Concerns( 顾 虑 ) what “is”, “was”, or “will be”, and
contains no indication of approval or disapproval
( 没有批准或不批准的迹象 )(what should be)
c) However, positive statement can be factually
incorrect( 实 际 上 是 不 正 确 的 ): "The moon is made of
green cheese" is empirically false, but is still a
positive statement, as it is a statement about
what is, not what should be. 24
 Normative Statements
a) Used to make value judgments( 价 值 判 断 ),
identify problems( 找 出 问 题 ), and prescribe
solutions ( 规定解决方案 ).

b) Normative statements are characterised by

the modal verbs "should", "would", "could"
or "must".

c) Normative statements cannot be proved

or disproved by the facts alone.
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 Positive Analysis And Normative Analysis

• Positive analysis : Answers the question “What is?” or “What will be?”
• Normative analysis : Answers the question “what should do”

Positive Questions Normative Questions

• If the firm decreases the wage, • Should the firm decrease the
how many workers will lose wage?
their jobs?
• How does a college education • Should the government
affect a person’s productivity subsidize a college education?
and earnings?
• How do consumers respond to • Should the government cut
a cut in income taxes? taxes to stimulate the
economy?
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Learning Objectives
(1.5)
Basic Economic Problems

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 The Economic Problem
• What goods and services should an economy
produce? – should the emphasis( 重 点 ) be on
agriculture, manufacturing or services, should it
be on sport and leisure or housing?

• How should goods and services be produced? –

labour intensive( 密 集 ), land intensive, capital
intensive? Efficiency( 效率 )?

• Who should get the goods and services

produced? – even distribution( 均 匀 分 布 )? more for
the rich? for those who work hard? 28
 Problem Application
• Classify each of the following statements as
positive or normative.
– An increase in the minimum wage will increase the rate
of teenage unemployment
– The government should raise the tax on tobacco to
reduce the quantity of cigarettes sold
– An increase in the rate of growth of the money supply
will lead to a rise in the price level
– An increase in the interest rate will cause a decline in
investment
– The government should provide healthcare to anyone
who does not have health insurance

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 Reference

 Chapter 1
 Tucker, I.B (2017). Economics for
today. (9th ed.). Mason, OH:
Thomson South Western.
 Lecture Notes

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