2023/9/21

Syllabus
• Important Dates:
Every Tuesday (23:59) Exercise due
Every Wednesday (13:10) Lecture
Week 8, Nov. 1 Midterm Exam (35%)
Week 10, Nov. 15 Topic approval
Week 15, Dec. 20 Extra credits deadline
Week 16, Dec. 27 Final Exam (35%)

INTRODUCTION
• Incentive

KW: Anything that offers rewards to people who

change their behavior.
Mankiw: Something that induces a person to act.
Cambridge Dictionaries Online: Something that
encourages a person to do something.
Longman Dictionary of Contemporary English:
Something that encourages you to work harder, start
a new activity
[always good to have multiple opinions]
[how it differs from motivation?]

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INTRODUCTION
• Incentive vs. Motivation
Cambridge Dictionary Longman Dictionary
incentive Something that Something that encourages
encourages a person to you to work harder, start a
do something. new activity.
motivation Willingness to do Eagerness and willingness to
something, or do something without
something that causes needing to be told or forced
such willingness. to do it; the reason why you
want to do something.

[so how they differ from each other?]

INTRODUCTION
• Efficiency

KW: When an economy takes all opportunities to

make some people better off without making other
people worse off.
Mankiw: Society is getting the maximum benefits
from its scarce resources.
Wikipedia: (Economic efficiency is) the use of
resources so as to maximize the production of goods
and services.
Cambridge Dictionaries Online: the condition or
fact of producing the results you want without waste.

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INTRODUCTION
• Efficiency

KW: When an economy takes all opportunities to

make some people better off without making other
people worse off.
Mankiw: Society is getting the maximum benefits
from its scarce resources.
Wikipedia: (Economic efficiency is) the use of
resources so as to maximize the production of goods
and services.
[what do you think?]

INTRODUCTION
• Efficient in production vs. Efficient in allocation

Efficient in production maximizes the production

of goods and services; while efficient in allocation
maximizes society’s welfare.

Need both to achieve efficiency for the economy as

a whole.

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INTRODUCTION
• The use of economic models.

INTRODUCTION
• The use of economic models.
Example: The circular flow diagram.

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INTRODUCTION
• Fundamental Principles
Economy- One person’s spending is another’s income.
wide Standard of living depends on the economy’s
interactions; ability to produce goods and services.
How the Overall spending sometimes doesn’t match
economy what the economy is capable of producing.
works as a
Government policies can change spending.
whole
Prices rise when printing too much money.
Society faces a short-run tradeoff between
inflation and unemployment.

INTRODUCTION
• The use of economic models.
A simplified representation of a real situation with a
set of variables and a set of logical/quantitative
relationships between them.

• The use of ceteris paribus

Ceteris paribus means “other things equal” or
“holding other things unchanged.”

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

• Variables on the axes
• Unit of measure of the variables
• A point, a line or a curve (and their slopes),
an area, a trend, etc.

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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Unemployment rate (annual average, %)
3 4 2 5

67 69 71 73 75 77 79 81 8 3 85 87 89 91 93 95 97 9 9 10 1
Y ea r

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INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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Unemployment rate (annual average, %)
3 4 2 5

67 69 71 73 75 77 79 81 8 3 85 87 89 91 93 95 97 9 9 10 1
Y ea r

INTRODUCTION
• Graphs and Math

Interpretation of a two-dimensional graph

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Change in Unemployment Rate
0 -1 1

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More on Gains from Trade

• The production possibility frontier (PPF)

A graph that shows the various combinations of

amounts of two commodities that could be produced
using the same fixed total amount of resources.
On the PPF shows the maximum possible production
level of one commodity for any given production level
of the other, given the existing state of technology.

More on Gains from Trade

• The production possibility frontier (PPF)

The cake-and-cookie example:

unit/afternoon Cake(s) Cookies
Person A 6 12
Person B 2 10
Cake

[one big assumption?]

Cookie

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More on Gains from Trade

• The production possibility frontier (PPF)

A graph that shows the various combinations of

amounts of two commodities that could be produced
using the same fixed total amount of resources.
On the PPF shows the maximum possible production
level of one commodity for any given production level
of the other, given the existing state of technology.
• Efficiency (in production)
• Opportunity cost (marginal rate of transformation, MRT)
• Economic growth

More on Gains from Trade

• The production possibility frontier (PPF)
• Efficiency (in production)
Quantity of
Good A

Quantity of
Good B

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More on Gains from Trade

• The production possibility frontier (PPF)
• Opportunity cost (marginal rate of transformation, MRT)
Quantity of
Good A

Quantity of
Good B

More on Gains from Trade

• The production possibility frontier (PPF)
• Economic growth
Quantity of
Good A

Quantity of
Good B

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POP QUIZ 3:
Given the PPF below, which of the following is true?
(A) Efficiency for the economy as a whole is achieved.
(B) The MRT is increasing.
(C) Efficiency in allocation is achieved.
(D) Efficiency in production is achieved.
QA

QB

INTRODUCTION
• Positive statements vs. Normative statements

Positive statement describes the fact.

Normative statement gives suggestions.

Example: 2023/9/6 07:08 (9/6 08:02 更新) (摘錄)

（中央社記者張雄風台北5日電）嘉義新港5日
下午發生芮氏規模5.5地震，氣象局地震測報中
心表示，研判起因是在歐亞大陸板塊和菲律賓
海板塊擠壓下，力量於嘉義一帶釋放，未來2週
內可能有規模4到4.5餘震。

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INTRODUCTION
• Positive statements vs. Normative statements

Positive statement describes the fact.

Normative statement gives suggestions.

Example: 2023/9/5 15:38 (9/6 08:30 更新) (摘錄)

（中央社記者曾以寧台北5日電）疾管署發言人
曾淑慧在疫報記者會上表示，國內目前登革熱
疫情處上升階段，且近期颱風來臨，提醒民眾
務必清除戶內外積水，避免病媒蚊孳生，清理
時要穿長靴、防水手套，避免疾病傳播。

EXERCISE 2: Positive vs. Normative statements

• Find an example of news story (max. 1 point) and
determine whether it contains positive or normative
statements (max. 1 point).
• Submit via the course website before Sep. 26th 23:59

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