1 / 6

Lecture 1

Lecture 1. Art of the Economic Argument. Methodology of Economics. Definition of economic issue or question May or may not be refutable Normative question: Not refutable The income distribution of Norway is superior to Canada Canada’s income distribution is inferior to USA

tarala
Télécharger la présentation

Lecture 1

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Lecture 1 Art of the Economic Argument

  2. Methodology of Economics • Definition of economic issue or question • May or may not be refutable • Normative question: Not refutable • The income distribution of Norway is superior to Canada • Canada’s income distribution is inferior to USA • What standard would you use to measure income distribution? Mean, Medium, ? • What is your prior ? • More (less) unequal is (better) (worse)

  3. Methodology of Economics Continued • Positive Economics • Price increase always leads to a quantity decrease • Model: Consumer Utility maximization • Axioms • More is preferred to less • If only two goods they must be substitutes • A rise in income then the demand for one or both goods must rise. • No saving

  4. Some Questions: Normative or Positive ? • Is globalization Good? • Is child labour good? • Is Free Trade Good? • Appreciation of home currency reduces exports • Which of the above questions are normative and why? • How would you go about answering them?

  5. Methodology of Economics Continued • Propositions • U=F(X1, X2 …………..Xn) • S.T. Y= P1 X1 +P2 X2 +…….Pn Xn Deduction: Given Axioms and Propositions: Delta Q /Delta P <0 Or Demand curve is downward sloping.

  6. Proof • Use data and approriate statistical technique • Price of salmon fell from $5.00/kilo to $1.00/kilo • Estimate own price elasticity of demand • -2.0 • How much quantity is consumed at $1.00 in elasticity is =-2.0 • 10 times as much as at $5.00. • Is this true?

More Related