1. Introduction and Supply & Demand

  • Microeconomics - study of how individuals/firms make decisions in a world of scarcity. Microeconomics is the fundamentals, macro is the fun application of it.
  • Scarcity drives microeconomics. Individuals/firms try to oprimise to become well-off.
  • Opportunity cost - every action or inaction has a cost in that you could’ve been doing something else instead.
  • It’s all about constained optimisation, principles you learn in engineering and applied to ecnomics and people instead of machines.
  • All models are good but some are useful.
  • Economics at it’s base is a very right wing science.
  • Positive and normative analysis
    • Positive analysis - study things as they are
    • Normative analysis - study things on how they shoud be
  • Normative Analysis
    • Market failures - eg: fraud, imperfect information
    • Behavorial Economics
    • Equity/Equality
  • How freely must an economy function?
    • America is capitalist free economy nation.
      • It has led to tremendous growth.
      • America is also the mosy unequal society, because 1% of population controls most of the money in the system
      • It is also hard to apply laws to prevent fraud. eg: Enron
    • Command economy or state capitalism
      • Checks and balances are in the control of the government which leads to a lot of corruption
      • Captialist economy has this kind of an invisible hand that fixes this problem.
  • Adam Smith says “Individuals and firms acting in their own best interest would do what is best for the society.
  • “Best” here means the most stuff being produced and consumed.

Notable people

  • Adam Smith - Wealth of Nations

Open questions

  • What is this invisible hand and does it really work?