Introduction to Economics & Business economics
June 19, 2025
1
,Introduction to Economics & Business economics
Contents
1 Lecture 1: Introduction 4
1.1 The economic problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 Lecture 2: Specialisation & Exchange 5
2.1 economic growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Trade & exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 Lecture 3: Markets 8
3.1 Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Market failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4 Working group 1 11
5 Lecture 5: Markets & information 11
5.1 externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Neoclassical theory of the firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2.1 Standard of living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6 Lecture 6: Game theory 14
6.1 Game theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.1 Auction games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7 lecture 7: transaction costs economics 17
7.1 Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8 lecture 8: Agency theory & corporate governance 21
8.1 separation of ownership and control . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9 Lecture 9: The behavioural theory of the firm 24
9.1 risk aversion and loss aversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10 Lecture 10: Competitive & corporate strategy 26
10.1 SCP-paradigm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 competitor analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 resource based view of the firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Competitive implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.5 corporate strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.6 (Un)related diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2
,Introduction to Economics & Business economics
11 Lecture 11: Hybrid approaches and evolutionary economics 30
11.1 evolutionary approaches to organisations . . . . . . . . . . . . . . . . . . . . . . 33
12 Lecture 12: Mergers, acquisitions & FDI 35
12.1 success or failure? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.2 Foreign direct investment (FDI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13 Summary lecture 39
13.1 part 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3
, Introduction to Economics & Business economics
1 Lecture 1: Introduction
multiple choice is 10Q 30%
Economic growth based in productivity growth.
Prices determine the distribution of wealth in capitalist society.
rational behaviour is assumed in traditional economics.
1.1 The economic problem
What to produce, where to produce and how much to produce?
Wants are unlimited but resources are not, For consumers, this is time & money.
scarcity → choices
choices → competition
competition → allocation of resources → efficiency (&inequality)
opportunity costs: Net welfare effect you miss out on by making a choice.
second option has a certain value that you miss out on. (net worth of second choice)
sunk costs: costs that cannot be (fully) recovered.
MR = MC determines how many products a firm should produce in a perfect competitive
market (price taker). leads back to economic problem.
4
June 19, 2025
1
,Introduction to Economics & Business economics
Contents
1 Lecture 1: Introduction 4
1.1 The economic problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 Lecture 2: Specialisation & Exchange 5
2.1 economic growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Trade & exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 Lecture 3: Markets 8
3.1 Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Market failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4 Working group 1 11
5 Lecture 5: Markets & information 11
5.1 externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Neoclassical theory of the firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2.1 Standard of living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6 Lecture 6: Game theory 14
6.1 Game theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.1 Auction games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7 lecture 7: transaction costs economics 17
7.1 Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8 lecture 8: Agency theory & corporate governance 21
8.1 separation of ownership and control . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9 Lecture 9: The behavioural theory of the firm 24
9.1 risk aversion and loss aversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10 Lecture 10: Competitive & corporate strategy 26
10.1 SCP-paradigm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 competitor analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 resource based view of the firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Competitive implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.5 corporate strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.6 (Un)related diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2
,Introduction to Economics & Business economics
11 Lecture 11: Hybrid approaches and evolutionary economics 30
11.1 evolutionary approaches to organisations . . . . . . . . . . . . . . . . . . . . . . 33
12 Lecture 12: Mergers, acquisitions & FDI 35
12.1 success or failure? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.2 Foreign direct investment (FDI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13 Summary lecture 39
13.1 part 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3
, Introduction to Economics & Business economics
1 Lecture 1: Introduction
multiple choice is 10Q 30%
Economic growth based in productivity growth.
Prices determine the distribution of wealth in capitalist society.
rational behaviour is assumed in traditional economics.
1.1 The economic problem
What to produce, where to produce and how much to produce?
Wants are unlimited but resources are not, For consumers, this is time & money.
scarcity → choices
choices → competition
competition → allocation of resources → efficiency (&inequality)
opportunity costs: Net welfare effect you miss out on by making a choice.
second option has a certain value that you miss out on. (net worth of second choice)
sunk costs: costs that cannot be (fully) recovered.
MR = MC determines how many products a firm should produce in a perfect competitive
market (price taker). leads back to economic problem.
4
