Economics
BE4158
First meeting
IBE at Petra
Krisna Gupta
Monday, February 8th 2021
Today’s content ☀
- housekeeping
- about studying economics
- some main principles
Who am I? 👀
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A PhD student of Economics at Crawford School of Public Policy, Australian National University (ANU).
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Research about trade and industry, in particular how trade and investment policy shape Indonesian manufacturing industry.
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Ocassionally writes in online portals and personal blog
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An ocassional gamer, campsite musician and sometimes tweet.
About the content of BE4158 📚
- This course is based on Krugman and Wells (2016).
- covered are principle of microeconomics:
- Supply and demand
- the market and its limitation
- strategic thinking
- and macroeconomics:
- GDP, inflation, unemployment, the government
- What does it mean for business
- The content is very similar with Mankiw (2009) available at your library.
- books can be useful but are not required.
Some expectations from student
- No prior knowledge is required.
- Please be active and ask questions.
- Good internet connection is assumed.
- Good english is assumed and expected to be used thoroughly.
- No cheating! Especially during exams.
Some rules
- The lectures will be about 1.5 - 2 hours length.
- I expect all students to pay attention.
- I would greatly appreciate you turning on your cams.
- There will be a small quizzes in the middle of each class.
- make sure you pay attention.
- You are welcome to go off cam and AFK at any time you like.
- Feel free to interrupt my class with questions.
- alternatively, you can use chat if you are shy, or ask me later thru e-mail.
Structure of this course
*** MIDTERM EXAM ***
Exams etc ✍🏾
| evaluation |
covers |
% |
| quiz |
everyday, best of 10 |
20 |
| midterm exam |
first 7 meetings |
40 |
| final exam |
last 7 meetings |
40 |
- Only your best 10 will be used for graded quiz out of 14 meetings.
- the quiz will be given by the end of every lecture.
- A bit of an intern quiz in the middle of each meeting, ungraded.
- Slides should be enough to get a good grade.
- However, to get an A, you should master the principle.
- All course materials are accessible through lentera and google classroom in pdf.
- All announcement will be posted on lentera and google classroom.
- I believe it will patch through your Petra e-mail as well.
- Feel free to let me know what’s best for your learning.
- The course is also available at my website, s.id/econ101.
- It is in html format so you don’t have to download.
- Also can be viewed on your phone.
- I will update the course on a weekly basis.
Now let’s appoint a class rep!
- for now, class rep’s responsibility is to just administering attendance.
- any student is allowed to contact me directly.
Why economics?
- Contrary to what normal people think, economics is not about (just) money.
- Economics is all about making optimal decision under scarcity.
- We use math principle to optimise our decision making.
- This course is not going to dig too deep into the world of economic principles.
- This course does not provide answers to your question: It teach how to use economic framework to shape your question.
Some questions asked by economists
- How to best tackle climate change?
- Is minimum wage good?
- Should we introduce tax holiday to firms?
- Should the government increase expenditure by more tax or more debt?
- Should we introduce Universal Basic Income?
- How to evaluate government program?
- Should we ban mineral export?
- can we sustain economic growth?
- what to do during economic crisis?
More questions can be answered with (partially) economic principles
- lockdown or not lockdown?
- Should we invest in testing and tracing? or should we invest in treatment?
- Who to vaccine first: the elderly and vulnerables, or the working age?
- Should we trust BUMN, or private sector?
- essentially, it’s about tradeoffs, cost and benefit.
About your learning
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To get a glimpse of what economists usually do, you can take a look at my blog. examples:
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Questions you might be interested in:
- should I expand to other market or continue serving my niche?
- Should I outsource or make our own?
- Recruit fresh grads or train high school graduates?
- Update current system or adapt new system?
Principles of Economics 💰
People make choices
because resources are scarce
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resource can be anything you use to produce.
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Money is the most mainstream limited resource.
- Buy only one holiday package.
- Buy only one portion of nasi goreng.
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But there are other resources worth noting.
- There’s only one holiday season in a year.
- Two nasi gorengs would be too much for my stomach.
The true cost of something is its opportunity cost
- money is just one type of cost.
- The true cost of taking a holiday to Hong Kong is going somewhere else.
- Your holiday can be spent on learning new stuff.
- What is the cost of doing your degree?
- Going straight to work and get experiences.
- Doing other degrees (biology, chemistry, etc).
- enjoy life.
- essentially, opportunity cost of something is something else you gave up to get it.
Thinking at the margin
- The principle of opportunity cost leads to a marginal thinking.
- Understand your status quo, and think what action you can do to add a little improvement from it.
- If you have two hours to study or play, how will you divide it?
- what if there’s an exam tommorow?
- If you are tired of studying, would you study more?
Specialisation and gains from trade
- During your daily time, you make decisions on allocating how much time to study and to cook, among other things.
- Since you will die if you don’t eat, you can’t allocate 0 hour to cook.
- On the other hand, there are those who are very good cook and will cook for you for a little money.
- In this case, it may be better if you spend 0 hour to cook, and order food from these chefs.
- Trade is the reason why I can study economics: I don’t have to study how to be a doctor. I will just go to the hospital if I need a medical service.
Specialisation and gains from trade
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Extending to firm level, many outsource part of their business from a third party.
- buying
office probably better than developing our own softwares.
- why make our own server if we can use
?
- Use tokopedia instead of making your own e-store.
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We can easily extend this to a country level:
- Japan makes car because they cannot plant palm oil.
Incentives matter
- People move to cities because there are more opportunities there.
- People will buy cheaper products given the same price.
- incentives are not always about money:
- You study more on the subjects you like.
“ada gula ada semut”
Market and intervention
- often times, market incentives are enough.
- However, intervention is often used.
- education is an example where government intervene heavily.
- Gojek used subsidy to incentivies drivers and users.
- Intervention may be temporary.
- The COVID-19 relieve bill (PEN) will likely stop after the pandemic.
- Gojek’s subsidy is removed once they reach economies of scale.
Things tend to move to equilibrium
- When there is an incentive to do something, there will be more and more people exploit it.
- As more people do it, the incentive decreases to a point where it is not worth it anymore.
- examples:
- City becomes more crowded (and costly to live in).
- Stock price stops growing few moments after its IPO.
- Countries' economic growth reduced after they get rich.
- Movement towards equilibrium, however, varies.
- short run vs long run.
- individual vs aggregate.
Conclusion
- We will see how these principles come up again and again as we delve deeper into the course.
- The principle will be carried over to your overall degree, and life in general.
- I am not trying to make you an economist, but the principles are very useful.
Housekeeping!
- Joy is the class rep.
- We’ll use Zoom over Google Meet.
- Quizizz is used for everyday lecture.
- what else?
Next week: Supply and demand
Economics BE4158 First meeting IBE at Petra Krisna Gupta Monday, February 8th 2021