Lecture 1 – Introduction

Differing Perspectives, Basic Principles

Learning Outcomes:

 Understand that there are several

perspectives and viewpoints on
the variety of economic issues
that you will study.
 Appreciate the different contexts
– global, regional, national

(e.g. ‘Inequality’ Article on Stream – think

about the various interpretations of the
statement ‘the rich are getting richer, the poor
are getting poorer’).

 Understand basic economic

concepts and principles
(Refer any standard Principles of
Economics textbook –
introduction.)
Ten Principles of Economics

The study of economics is guided by a few big

ideas (Mankiw, G.)
Reading: Various editions of Mankiw’s ‘Principles’
textbooks covers these big ideas neatly e.g.
Mankiw, G. (2012) Principles of Macroeconomics
Cengage - chapter 1) or Refer any principles of
economics textbook e.g. Frank and Bernanke
(2007) Principles of Macroeconomics 3rd ed.
McGraw Hill
1. Trade-offs: Society - efficiency and equity;
2. Opportunity Cost
3. Marginal Thinking: incremental changes
4. Incentives affect behaviour
5. Trade can make everyone better off
6. Market allocation: ‘markets are usually a good
way to organize economic activity’ Mankiw
Adam Smith 1776
An Inquiry into the Nature and Causes of
the Wealth of Nations
Invisible hand
7. Government – can sometimes improve market
outcomes
Market failure
Externalities
Market Power
8. Ability to Produce Goods and Services:
Productivity
 9. Inflation – ‘Prices rise when the Government
prints too much money’
10. Inflation vs Unemployment Trade-off (short-
run)
Reading on Stream:

Loungani, P. (2003) ‘Inequality’ Finance & Development, September, Volume 40,

Number 3, pp. 22-23.

This article highlights that there are different measures of income inequality.
Statements like ‘the rich are getting richer; the poor are getting poorer’ can have a
variety of meanings. Appreciating the different contexts – global, regional, national, is
important to gaining proper understanding of issues such as this, as well as most other
contemporary economic issues.

Further Reading on Inequality:

Inequality is an important contemporary topic which we meet up with in the next
topic on globalisation too. We will take up income inequality later in this paper as a
topic but if you wish to read further on it at this stage, I recommend the summary of
the UNDP Report - UNDP (2013) Humanity Divided: Confronting Inequality in
Developing Countries
See:
http://www.undp.org/content/undp/en/home/librarypage/poverty-reduction/humanity-
divided--confronting-inequality-in-developing-countries/