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    The document discusses the scope of economic analysis. It begins by stating that economic problems arise due to scarcity. There are three main economic questions: what goods and services should be produced, how should they be produced, and who should be the consumers. It provides examples to illustrate these questions. The document then discusses opportunity cost as the highest valued alternative forgone in a decision. It provides an illustration comparing the opportunity cost of a 4-year degree program versus a full-time job. Finally, it briefly outlines economics as a social science involving building models to answer questions and check predictions, and distinguishes normative from positive statements.

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    The document discusses the scope of economic analysis. It begins by stating that economic problems arise due to scarcity. There are three main economic questions: what goods and services should be produced, how should they be produced, and who should be the consumers. It provides examples to illustrate these questions. The document then discusses opportunity cost as the highest valued alternative forgone in a decision. It provides an illustration comparing the opportunity cost of a 4-year degree program versus a full-time job. Finally, it briefly outlines economics as a social science involving building models to answer questions and check predictions, and distinguishes normative from positive statements.

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    4 views2 pages

    Topic 1 - Supp Notes

    Uploaded by

    crypto1
    The document discusses the scope of economic analysis. It begins by stating that economic problems arise due to scarcity. There are three main economic questions: what goods and services should be produced, how should they be produced, and who should be the consumers. It provides examples to illustrate these questions. The document then discusses opportunity cost as the highest valued alternative forgone in a decision. It provides an illustration comparing the opportunity cost of a 4-year degree program versus a full-time job. Finally, it briefly outlines economics as a social science involving building models to answer questions and check predictions, and distinguishes normative from positive statements.

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    © All Rights Reserved
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    Supplementary Notes of Topic 1: The Scope of Economic Analysis

    All economic problems and questions arises because of ________________________


    - Scarcity is the condition that arises because resources are ___________________ relative to
    ____________________ human wants.

    Three Economic Questions:


    Based on the characteristics of available resources, what goods and
    - Choices of services should be produced?
    products & - To offer more AD places or HD places by HKCC?
    services - To build up more residential buildings or commercial buildings?
    How the goods and services be produced with various production
    - Choices of methods?
    production - by recruiting more labor?
    methods - by using more machine?
    Distribution methods for the final goods and services
    - Choices of Who are the buyers / users / targeted receivers, it is determined by
    buyers / users various distribution criteria:
    - by market price, e.g. who have enough money to buy it?
    - by how lucky you are, e.g. the lucky numbers in the Home
    Ownership Scheme.
    - by the characteristics you have, e.g. who know Putonghua can
    understand radio programme spoken in Putonghua

    Examples
    “What”, “how” and “for whom” questions?

    “……The Director of Kowloon College announced to launch a new Degree program


    rather than a new AD program……”
    “……The Director of Kowloon College announced that an on-line program would be
    launched……”
    “……The Director of Kowloon College announced that a program would be
    launched for those AD/HD degree holders…”

    Economic way of thinking


    - Benefit is the gain or pleasure that something brings. In Economics, benefit is measured by
    “what you are ___________________ to give up”.
    - In Economics, costs are in terms of the concept of “opportunity cost” which is “the best
    thing that you ____________________ give up to get something”—
     By definition, the highest-valued option forgone for an act or a decision.
     By calculation, the total opportunity cost can be the sum of________________ and
    _______________________.
    Illustration 2 on PPT p. 7
    A 4-year degree program VS a full time job

    Scarcity: limited time and money



    Choice from available options: a 4-year degree program or a full time job

    Rational decision:
    When (marginal) benefit from the UG place  (marginal) cost

    What is the total Opportunity Cost of taking a UG place?


    - Money cost (forgone money value which represents the direct money expenses):
    - Time cost (forgone benefit from the alternative use for the same time period):
    Total OS is:

    Additional PPT after p. 11

    Economics as a Social Science: 3-step


    Step 1: to begin with a question about cause and effect arising from some observed facts
    Step 2: to build a model that provides a possible answer to the question
    Step 3: to check the prediction of proposed model

    Normative versus Positive:


    _________________ statements —statements about what ought to be.
    _________________ statements —statements about what is.

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