1. Why economics?
• To understand everyday life
• To understand society / be an informed citizen
• To learn a way of thinking
2. The economic problem
2.1. Scarcity & choice
• Resources are scarce & therefore, we need to choose
➢ Natural, capital & human resources
➢ We make constrained choices (beperkte keuzemogelijkheden)
These choices determine:
1) What gets produced
2) how it is produced
3) who gets what is produced
How to decide:
➢ Weighting costs and benefits (only of the actual choice)
➢ Taking into account marginal costs and marginal benefits
• Opportunity cost = what you give up when you choose one thing over another
• Marginalism = the process of analyzing the additional or incremental costs and benefits arising from a choice or
decision
• Marginal cost = the extra cost of producing one more unit of a good or service
• Marginal benefit = the increase in benefit from an additional unit produced or consumed
2.2. Specialization & exchange
• Theory of comparative advantage = Specialization and trade will benefit all trading parties (David Ricardo)
➢ Absolute advantage = if they can produce something using less resources than someone else → lower absolute
cost per unit
More efficient
➢ Comparative advantage = if they can produce something at a lower opportunity cost than someone else
Making smarter trade-offs
• Production possibility frontier (PPF)
➢ The combination of all goods and services that can be produced if resources are used efficiently
SUMMARY
➢ Scarcity forces choices. We make decisions by comparing marginal costs and benefits. These choices create
opportunity costs, which lead to specialization and trade. Trade expands what we can achieve.
, 3. The scope of economics
• Economics
➢ what economists do
➢ the study of economies
➢ the study of how individuals and societies choose to use the scarce resources that nature and previous
generations have provided
• Economics
➢ use their tools to a very wide range of topics
➢ simply want to explain everything in society with their methods and models
➢ try to make sense of everyday life
• Micro-economics = Behavior of individual decision-making units: firms & households
➢ Production in a sector or a firm
➢ Prices of individual goods & services
➢ Distribution of income & wealth
➢ Employment in a sector, by individual firms and households
• Macro-economics = Economic behavior of aggregates on a national scale
➢ National production and output
➢ Aggregate price levels
➢ National income
➢ Employment and unemployment in the economy
• Fields of economics:
➢ Agricultural economics • Behavioral economics • Business economics • Development economics • Economic
history • Environmental economics …
• Bio-economics: economics of the bio-economy
➢ The bio-economy = bio-based economy
= biotech-economy (Can be interpreted in a narrow or a broad way)
➢ Focuses on:
Sustainability: an economy that serves society and respects planetary boundaries
Circular economy: reducing waste
Sectors: agriculture, forestry, fishery, food, energy, textile, ….
Production and consumption of bio-based products: food, feed, flowers, fiber, biofuel, bioplastics,
pharmaceuticals, …
• To understand everyday life
• To understand society / be an informed citizen
• To learn a way of thinking
2. The economic problem
2.1. Scarcity & choice
• Resources are scarce & therefore, we need to choose
➢ Natural, capital & human resources
➢ We make constrained choices (beperkte keuzemogelijkheden)
These choices determine:
1) What gets produced
2) how it is produced
3) who gets what is produced
How to decide:
➢ Weighting costs and benefits (only of the actual choice)
➢ Taking into account marginal costs and marginal benefits
• Opportunity cost = what you give up when you choose one thing over another
• Marginalism = the process of analyzing the additional or incremental costs and benefits arising from a choice or
decision
• Marginal cost = the extra cost of producing one more unit of a good or service
• Marginal benefit = the increase in benefit from an additional unit produced or consumed
2.2. Specialization & exchange
• Theory of comparative advantage = Specialization and trade will benefit all trading parties (David Ricardo)
➢ Absolute advantage = if they can produce something using less resources than someone else → lower absolute
cost per unit
More efficient
➢ Comparative advantage = if they can produce something at a lower opportunity cost than someone else
Making smarter trade-offs
• Production possibility frontier (PPF)
➢ The combination of all goods and services that can be produced if resources are used efficiently
SUMMARY
➢ Scarcity forces choices. We make decisions by comparing marginal costs and benefits. These choices create
opportunity costs, which lead to specialization and trade. Trade expands what we can achieve.
, 3. The scope of economics
• Economics
➢ what economists do
➢ the study of economies
➢ the study of how individuals and societies choose to use the scarce resources that nature and previous
generations have provided
• Economics
➢ use their tools to a very wide range of topics
➢ simply want to explain everything in society with their methods and models
➢ try to make sense of everyday life
• Micro-economics = Behavior of individual decision-making units: firms & households
➢ Production in a sector or a firm
➢ Prices of individual goods & services
➢ Distribution of income & wealth
➢ Employment in a sector, by individual firms and households
• Macro-economics = Economic behavior of aggregates on a national scale
➢ National production and output
➢ Aggregate price levels
➢ National income
➢ Employment and unemployment in the economy
• Fields of economics:
➢ Agricultural economics • Behavioral economics • Business economics • Development economics • Economic
history • Environmental economics …
• Bio-economics: economics of the bio-economy
➢ The bio-economy = bio-based economy
= biotech-economy (Can be interpreted in a narrow or a broad way)
➢ Focuses on:
Sustainability: an economy that serves society and respects planetary boundaries
Circular economy: reducing waste
Sectors: agriculture, forestry, fishery, food, energy, textile, ….
Production and consumption of bio-based products: food, feed, flowers, fiber, biofuel, bioplastics,
pharmaceuticals, …
