Week 1 - 6/9/2024 (+introductory notes)
MICROECONOMICS = the study of how individuals and businesses make
decisions
- uses tools like supply and demand, costs of production and labor
economics (and other forces that determine price levels, making it a bottom-up
approach)
MACROECONOMICS = the study that analyses the decisions made by countries
and governments
- looks at the economy as a whole to determine its course and nature
MONETARY POLICY = addresses interest rates and supply of money in
circulation (generally managed by the central bank)
FISCAL POLICY = addresses taxation and government spending (generally
determined by government legislation)
INFLATION = an increase in the general levels of prices
DEFLATION = a decrease in the general levels of prices
RECESSION = a significant downturn in economic activity (e.g. negative GDP)
⸻
BIG IDEAS
Incentives - rewards and penalties that motivate behaviour
e.g. Fame, power, reputation, sex, and love are all important incentives.
People respond in predictable ways to incentives of all kinds
– Self-interest aligns with the broader public interest = good outcome
– Self-interest and social interest are at odds = bad outcome (e.g.
inhumane and cruel outcomes)
At the right market conditions, self interest and social interest align
Drug lag = You can die because an unsafe drug is approved—you can also die
because a safe drug has not yet been approved
Drug loss = You can die because an unsafe drug is approved—you can also die
because a safe drug is never developed
– (People will be put to risk from an unsafe drug but also if a good
drug is not made)
– Being super safe can also be dangerous and too expensive - so be
deprived of new good drags as there will be less development
More testing - more safe drugs but also more drug lag and loss
-> this is a trade-off - trade offs are everywhere
We face trade offs because of SCARCITY (can’t satisfy everyones needs)
MICROECONOMICS = the study of how individuals and businesses make
decisions
- uses tools like supply and demand, costs of production and labor
economics (and other forces that determine price levels, making it a bottom-up
approach)
MACROECONOMICS = the study that analyses the decisions made by countries
and governments
- looks at the economy as a whole to determine its course and nature
MONETARY POLICY = addresses interest rates and supply of money in
circulation (generally managed by the central bank)
FISCAL POLICY = addresses taxation and government spending (generally
determined by government legislation)
INFLATION = an increase in the general levels of prices
DEFLATION = a decrease in the general levels of prices
RECESSION = a significant downturn in economic activity (e.g. negative GDP)
⸻
BIG IDEAS
Incentives - rewards and penalties that motivate behaviour
e.g. Fame, power, reputation, sex, and love are all important incentives.
People respond in predictable ways to incentives of all kinds
– Self-interest aligns with the broader public interest = good outcome
– Self-interest and social interest are at odds = bad outcome (e.g.
inhumane and cruel outcomes)
At the right market conditions, self interest and social interest align
Drug lag = You can die because an unsafe drug is approved—you can also die
because a safe drug has not yet been approved
Drug loss = You can die because an unsafe drug is approved—you can also die
because a safe drug is never developed
– (People will be put to risk from an unsafe drug but also if a good
drug is not made)
– Being super safe can also be dangerous and too expensive - so be
deprived of new good drags as there will be less development
More testing - more safe drugs but also more drug lag and loss
-> this is a trade-off - trade offs are everywhere
We face trade offs because of SCARCITY (can’t satisfy everyones needs)
