EFB 23115 - Week 1 Lecture

• Course Description
• Introduction to Economics (Ch 1)
Course Description
 STAFF

Subject Coordinator:
Chris Bajada
Lecturer:
Mario Fiorini
Head Tutor:
Alison Lim
Other members of the teaching team:
Alex Collingwood, Harry Tse, Maruf Ahmed, Peter Wang, Reza
Fathollahzadeh Aghdam, Barbara Rapaport, Thomas Heymann,
Abdullah Al Mamun
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 CONTACT INFORMATION

 Contact Details of each staff member can be found on Canvas under the
Get started module “Your teaching staff”
 Consultation hours: Each staff member – tutors included – will be
available 1 hour per week for face-to-face consultation.
 Consultation hours for each staff member can be found on Canvas under
the Get started module, “Your teaching staff”.

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 LECTURE DELIVERY

 Live Zoom and Recorded: each lecture is

 Given live on Zoon on Thursday at 4:00 pm and
 Its recording is posted on Canvas after the lecture (might take a few hours for the file
to be processed)
 We are doing live Zoom lecture to keep the lectures interactive
 Please feel free to ask questions and engage in discussions when prompted
 Occasionally, I will use https://pingo.coactum.de to keep the lectures interactive
(please bookmark this address on your device)

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 Let’s interact a bit - PINGO

 Now please go to
pingo.coactum.de
 And insert session number 5718
 Or use this QR code

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 pingo.coactum.de (Session 5718)
 Did you study Economics in High-School?
A. Yes, and I liked it
B. Yes, and I did not like it
C. No

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 ABOUT ECONOMICS FOR BUSINESS 23115

 Introductory course to Economics

 No prior knowledge of economics is assumed

 Divided into two parts:

 First half Microeconomics (lectures 1-6)

 Second half Macroeconomics (lectures 7-11)

 Please refer to the Teaching and Learning Schedule for a

detailed list of topics and corresponding textbook chapters

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 RESOURCES: Canvas

 https://canvas.uts.edu.au

 From the Canvas page of 23115 Economics for Business (EFB) you can:

 See/download the Subject Information and Teaching and Learning

Schedule;

 Download the course material: lecture slides and tutorial material;

◼ New documents will be uploaded under “Week #” on a weekly basis as
the course progresses;
 Check “Announcements” to keep you up-to-date with the course (please
check announcements at least twice a week);

 Access Online Problem Sets for practice and assessment purposes.

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 RESOURCES: Canvas (cont.)

 From Canvas you will be able to access the Discussion Board:

 It is a forum where you can share your learning with your peers and interact
with teaching staff;
 You can post questions and comments about the course;
 Moderated by a staff member (Alison Lim) who will be ready to answer your
questions where appropriate.

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 RESOURCES: TEXTBOOK

 There are two textbooks used in this subject which can be purchased as a
bundle in hardcopy or as an e-book.
 Gans, Joshua, Stephen King, Martin Byford and N Gregory Mankiw, Principles of
Microeconomics, 9th AU/NZ edition, 2023, Cengage Learning, Australia.
 Robin Stonecash, Gans, Joshua, Stephen King, Martin Byford, Kris Ivanovski and N
Gregory Mankiw, Principles of Macroeconomics, 9th AU/NZ edition, 2023,
Cengage Learning, Australia.
 Note that these textbooks will also be used in Economics for Business 2.

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 I HAVE A QUESTION ABOUT…

 the administrative aspects of the subject:

 Please check the subject information, announcements and Canvas’s discussion
board
 If the question is not already addressed there post on the discussion board
 If the question is specific to your circumstances, please email the subject
coordinator or the teaching team [email protected]
 the content (e.g. model and theory in the lecture)
 During the lecture/tutorial feel free to ask at anytime
 After the lecture:
◼ Post on the Discussion Board OR
◼ Book consultation with your lecturer and/or your tutor during his/her
consultation hours
 Statement on UTS email accounts: Email from the University to a student will only
be sent to the student's UTS email address. Email sent from a student to the
University must be sent from the student's UTS email address. University staff will not
respond to emails from any other email accounts.
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 ADDITIONAL RESOURCES

 U:PASS: a student learning program designed to assist students who are

studying subjects that are perceived as difficult. (PASS stands for Peer
Assisted Study Success)
 Visit the following website for more information:
http://www.uts.edu.au/current-students/support/upass/upass
 Introductory video https://www.youtube.com/watch?v=UjiM4OTxpDg

 HELPS: Higher Education Language and Presentation Support (HELPS)

provides non-credited English language and academic literacy support to
UTS undergraduate and postgraduate coursework students.
 Visit the following website for more information:

http://www.uts.edu.au/current-students/support/helps/about-helps

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 HOW TO DO WELL IN THIS SUBJECT?

 Ask questions during the lecture/tutorials

 Use the discussion board
 Go to office hour
 Attend U:PASS sessions
 Prepare the tutorials
 Do all the assignments
 Get to know each other and interact with other
students
 Use UTS personal support services
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 ASSESSMENT: 3 ITEMS

 Portfolio 40%:
 Online Problem Sets (individual, 20%);

 News Analysis (individual, 20%).

 Final exam (individual, 60%).

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 ASSESSMENT – ONLINE PROBLEM SETS (20%)

 Online problem sets (Individual): 20%

 The aim of the Online Problem Sets is to help you develop study habits
and provide constant feedback on your understanding of key. 6 problem
sets will be assessed.
 Grade is calculated from the best 4 (5% each).

 The release dates and deadlines of problem sets are listed in the
Teaching and Learning Schedule
 Late submissions will not be marked and awarded a mark of zero.

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 ASSESSMENT – NEWS ANALYSIS (20%)

 News Analysis (Individual): 20%

 You will be required to analyse news articles. Aim is to understand real
world scenarios.
 One News Analysis focuses on Micro-economics issue and one on Macro-
economics issues.
◼ Each News Analysis will count 10%
 The release dates and deadlines of the two News Analysis are listed in the
Teaching and Learning Schedule.
 Late submissions will not be marked and awarded a mark of zero.

 If you miss a News Analysis there is no re-weighting and no second-attempt

(i.e. you lose 10 marks).

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 ASSESSMENT – FINAL EXAM (60%)

 Final Exam: 60%

 It will cover all lectures and tutorials’ material.
 Scheduled during UTS Exam Period.

 The exam is Centrally conducted, meaning the dates and process are
set by the university not by the subject coordinator.
 More information about its structure will be provided during the term

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 Any question about the


subject’s goals and structure?

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Introduction to Economics

Principles of Microeconomics, Chapter 1

 pingo.coactum.de (Session 5718)
 Which of the following definitions best
describes Economics?
It is a social science focused on studying:
A. how to make money and manage personal finances
B. how society manages its scarce resources
C. the stock markets and investments

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 What is Economics
 The word ‘economy’ comes from the Greek word Oikonomos meaning ‘one
who manages a household’.
 Households and economies have much in common;

 Both face the same fundamental problem: Available resources cannot

produce all the goods and services people desire (scarcity).
 Economics is the study of how society manages its scarce resources.
 A more detailed definition: Economics is the social science that studies the
choices that individuals, businesses, governments make as they cope with
scarcity and the incentives that influence those choices.

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 Why Study Economics
 Economics trains you to think analytically about a wide range of issues and
helps you better understand the world in which you live
 From the social to the environmental, the labour market to government
policy, studying economics gives you the skills and knowledge to
understand the world around you and contribute to change it
 Economics will give you a better understanding of the potential and
limits of economic policy
 Economics prepares you for employment in diverse areas including business,
government, consulting, public policy, industrial relations, international
relations, media and environmental studies.

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 Why Study Economics

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 Economics is traditionally divided into
Microeconomics and Macroeconomics

 Microeconomics focuses on individual agents in the economy

 How households and firms make decisions and how they interact
 Aims to understand how scarce resources are allocated among
alternative uses, the role of prices and markets and how economic
policy can lead to better outcomes for society
 Macroeconomics looks at the economy as a whole
 Focuses on economy-wide phenomena, including inflation,
unemployment and economic growth
 The study of economics has many facets. Your textbook identifies 10 lessons
from economics that are central/unifying ideas of economics.
 These 10 lessons serve as an overview of what we will explore during
the course

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 Ten lessons from economics
1. People face trade-offs
2. The cost of something is what you
give up to get it How people make
3. Rational people think at the margin decisions

4. People respond to incentives

MICRO
5. Trade can make every one better
off
6. Markets are a usually a good way How people interact
to organise economic activity
7. Governments can sometimes improve
market outcomes
8. A country standard of living... How the economy as a
9. Prices rise when... whole works MACRO
10. Society faces a trade-off...
Today we will discuss the first four lessons because they are principles that are
26 central to all facets of economics and will be used throughout the course.
 Lesson 1. People face trade-offs
 Because of scarce resources, making decisions requires trading off one
goal for another
 Put simply, to get one thing that you want, you have to give up
something else
 Examples :

◼ Why is money a limited resource involving trade-offs?

◼ Why is time a scarce resource involving trade-offs?
◼ Why is government revenue a scarce resource involving trade-offs?

 The message: “to get something we like, we have to give up something else”
brings us to a second lesson

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 Lesson 2. The cost of something is what you
give up to get it
 Every time we make a decision, there are multiple alternatives available to
us. These alternatives could be different courses of action, investments, or
uses of our time and resources. Choosing one option means giving up the
potential benefits or opportunities associated with the other options.
 The opportunity cost of an item is the value of the next-best alternative that
you give up to obtain that item.
 In economics the cost of something is therefore:
 EXPLICIT monetary cost + IMPLICIT costs

 This means that Economic cost (aka Opportunity cost) is sometimes different
from the Accounting cost which typically only includes the EXPLICIT
monetary cost

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 Q. pingo.coactum.de (Session 5718)

 Which of the following are possible economic costs of

going to university? [Select all that apply]
A. Tuition Fees

B. Costs of Books and Supplies

C. Forgone income while studying

D. Forgone fun (leisure) while studying

E. Forgone returns from investments

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 Lesson 3. Rational people think at the
margin
 Often decisions are not about “all or nothing”, but about whether to make or
not a (relatively) small change to a given plan or activity.
 Economists think at the margin
 Marginal change: a small incremental adjustment to a plan of action.

 The cost associated to a marginal change is called marginal cost (MC) while
the benefit associated to the same marginal change is called marginal benefit
(MB).

 When a decisions is about whether to undertake a small change to a plan of

action, a rational person should compare MC to MB.

 Example: Suppose that flying a 200-seat plane from Brisbane to Perth costs
the airline $100,000, so that there is an average cost of $500 per seat. The
plane is minutes from departure and there are several vacant seats. A person
without a ticket is willing to pay $300 for a seat. Should the airline sell the
seat for $300?
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 Q. pingo.coactum.de (Session 5718)

 Example: Suppose that flying a 200-seat plane from Brisbane

to Perth costs the airline $100,000, so that there is an average
cost of $500 per seat. The plane is minutes from departure
and there are several vacant seats. A person without a ticket is
willing to pay $300 for a seat. What is the marginal
benefit of selling that seat for the airline?
 Enter value on PINGO

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 Q. pingo.coactum.de (Session 5718)

 Example: Suppose that flying a 200-seat plane from Brisbane

to Perth costs the airline $100,000, an average cost of $500
per seat. The plane is minutes from departure and there are
several vacant seats. A person without a ticket is willing to pay
$300 for a seat. What is the marginal cost of selling
that seat for the airline?
 Enter value on PINGO

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 Lesson 4. People respond to
incentives
 An incentive is a “reward” or “punishment” that induces a person to act (or
not to act) in a certain way.
 Examples:
 Fine if you are caught drink driving (punishment)
 Bonus to an employee if she exceeds expectations on her performance
(reward)
 Since rational people make decision considering costs and benefits, they
respond to incentives.
 Government policies often use a set of incentives to encourage or
discourage certain behaviours
 E.g. Tax on alcohol or cigarettes

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 Case Study: Choosing When the Stork Comes

 In May 2004, the then Treasurer Peter Costello announced a $3000

payment for every child born after 1 July 2004 (baby bonus’)
 This meant that the parents of someone whose birthday was 30 June 2004
or earlier would receive nothing.
 This created an incentive for parents to delay births, if they could. And by
agreeing with their doctors to schedule planned caesareans and inductions
a little later, births could be moved.
 Economists had argued that the policy should be ‘phased in’ so there were
no big jumps in payments on any given day

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 Case Study: Choosing When the Stork Comes

 In their paper ‘Born on the First of July’, Joshua Gans and Andrew Leigh
estimated that 1167 births were shifted from June to July that year
because of the baby bonus

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 Summary of lessons 1 to 4

Scarcity forces people to make decisions/choices about what to get and what
to give up (i.e. we face trade-offs).
The true cost of what we choose is what we give up to get it (opportunity
cost).
Making the right decision implies comparing costs and benefits. This
comparison is often made at the margin.
Since incentives alter the costs and/or benefits of our choices, we do respond
to incentives.

You can read Lessons 5 to 10 to get a flavour of the material that we will
cover later in this subject as well as in Economics for Business 2.

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 Further Readings
(not part of the subject content)
 This book by Andrew Leigh is a nice and recent (2024) historical
perspective on Economics:

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 What to Do for Week 2
 Review Chapter 1 of the textbook (The 4 Principles we discussed in class).
 Make sure you are able to access the online materials for the course (these
are available on Canvas.
 Try the Problems Sets that are already available for practice purposes.

 Download the tutorial material and try the questions before attending
tutorial 1.

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End of Lecture