BSB113 Notes

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Queensland University of Technology
Management and Human Resources

Rebecca Reaburn Lecture Notes Economics Week 1 o Happiness economics  Money  What makes people happy?  For global happiness to improve we need to raise the income of the poorest people o Everyone wants more than what is possible!  Non-material  Material o How do we decide what we want to do with these finite resources and how do we distribute them? o Ensure the best outcome is what economists strive to do o Humans have restricted time o Governments have a restricted budget o How do we choose  Decision making framework - decisions are best  Humans = utility and happiness  Government = welfare Economists assume this is their aim  Business = profit o Economy is not about money and values are different to accountants etc o For example making a hospital, you need $. There is only a certain amount of $ but the aim of a hospital is to make people better - this is the benefit side of the formula. Sometimes they will put a money value on each live saved because of this hospital. Money values make it easier in an equation because you can get a negative or positive amount o We will produce - so do we want policy decisions to benefit us now or our kids in the future o People make decisions about what's important and whose important everyday o Sometimes there is NO answer o Make decisions to maximise gain KEY ECONOMIC CONCEPTS o Competition  Public benefit  efficiency  Drives cost down which keeps consumers happy  Each participant acts selfish for personal gain  Adam Smith formulized competition  Something is driving them to do this but they don't know why  EXAMPLE: Apple - what was the sole motivator for Apple? It wasn't the happiness of others with their products. It was competition and revenue.  Each seller is scared another seller will take their business therefore they lower costs to near cost price  Prices ensure that individuals do what they do best to maximise their profit and happiness  Competition needs lots of buyers and lots of sellers o Functioning Markets  One seller for a particular product/service the government has to regulate  EXAMPLE: Petrol and carbon Tax - Fuel goes us, people will use less which is the aim to help the environment. People will use public transport which will look cheaper because petrol has gone up 1 Rebecca Reaburn Lecture Notes Economics o Homo Economicus  A utility maximising individual - SELFISH o Equilibrium  economic system is an equilibrium when it's not possible for anyone/anything to improve  Trying to get to the equilibrium means you are constantly anticipating events  tend towards producing more cheaply (optimal size)  EXAMPLE: Roman empire was too big  EXAMPLE: British empire was too big  constant change because there is an equilibrium o Creative Destruction  How economists think we move forward  The driving engine of economic prosperity  Old ways are destroyed to make way for new ways Week 2 o economists try to help us overcome scarcity o What is scarce?  Land - everything we get from mother earth (gold, iron, water, fish)  Labour - things people perform. The work of the people. Time and labour  Capital - equipment we have to produce goods (machinery etc)  Enterprise - knowledge and ideas of the people and organisers o all goods are important/valuable not just the scarce ones o Air is a free good - unlimited for everyone o economic goods are those that are scarce o economists look at capital that can produce things, not just money o poor countries look poorer because they use a lot of home production o different points of view economists ask: is it fair? are they doing this well? do we get value for money? o economics is not only about scarcity but about choice o can we can more out of the alternative o trade off - the option we can't use o let's make policies so that people make the good choices o taxation policy - makes people decide to work more or less Week 2 Tutorial o What is the main observation made by economists? Scarcity - limited resources for unlimited wants and needs o If a government increases funding for health, what are the 'costs' of this policy from an economic perspective? Resources for health will need to be taken from somewhere else. Opportunity Cost - value of the next best alternative you are foregoing o Explain in your own words what economists mean when they talk about the 'invisible hand'? When individuals are maximising their own self wealth EG: Milk - we go and buy milk from the cheapest place. Other sellers will bring their price down to compete. o What is the role of prices in the market? Signalling scarcity of that object 2 Rebecca Reaburn Lecture Notes Economics o Why are rules important in a free competitive market? The market is all about trying to have competition because that is the only way for the invisible hand to work o What are economies of scale? If you start producing more than price goes down. Lower cost to produce one, more efficient o Explain the concept of creative destruction Occurs from the continuing search for new. Out with the old and in with the new EG: Walkman to CD to MP3 to Ipod Lecture 3 o Models represent reality and allow us to make predictions o We assume buyers and sellers are both price takers o Demand curve - how many things you will buy at a set price o The more you have of a good the less you want of that good Week 3 Tutorial 1. Four reasons why wants and needs are considered virtually unlimited? a. Goods eventually wear out and need to be replaced b. New or improved products become available c. People get fed up with what they already own d. The more you have, the more you want 2. What are the four factors of production? a. Labour - the work of the people. Physical and Mental work of people. b. Capital - All manmade tools and machines. c. Enterprise - Managers and organisers and their networks. d. Land - anything we take from the land. Air, Fish, Iron, Gold. 3. What
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