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Lecture #1

INTRODUCTION
The course ECONOMICS 11:
Market and the State
An introduction to Economics
and the role that government
plays in the economy
Nov. 10, 2010

Econ. 11 - Introduction

Lecture #1
INTRODUCTION
MY NAME GERARDO SICAT
Lectures two hours a week.
Third hour discussion group
section led by a Teaching Fellow.
The reading list To be distributed,
with a lot of announcements
Nov. 10, 2010

Econ. 11 - Introduction

PRELIMINARIES
THE WORD MARKET REFERS TO
TRANSACTIONS BETWEEN
BUYERS (users, demanders) AND
SELLERS (providers, suppliers).

Buyers and sellers are economic


agents.
THE STUDY OF MARKETS IS THE
SUBJECT OF ECONOMICS.
Nov. 10, 2010

Econ. 11 - Introduction

PRELIMINARIES

THE STATE IS
ABOUT THE ROLE
OF THE
GOVERNMENT IN
THE ECONOMY.
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Econ. 11 - Introduction

PRELIMINARIES

THE TITLE MARKETS


AND THE STATE
REFERS TO THE
INTERACTION OF
ECONOMICS WITH THE
GOVERNMENT.
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Econ. 11 - Introduction

PRELIMINARIES

IT IS POSSIBLE TO START
THE STUDY OF THE
COURSE WITH ANY
SUBJECT THAT APPEARS
INTERESTING AND AT
RANDOM!
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Econ. 11 - Introduction

ECONOMIC PROBLEMS
DEFINITION OF THE PROBLEM
IMPLIES AN OBJECTIVE IS INVOLVED
ATTAINING THE OBJECTIVE
IMPLIES
RELATIONSHIP BETWEEN ACTUAL
RESOURCES AVAILABLE TO ATTAIN THE
OBJECTIVE
SOLUTION OF THE PROBLEM
ULTIMATELY INVOLVES DECISIONS
MEASURED IN TERMS OF PRICES AND
QUANTITIES
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Econ. 11 - Introduction

ECONOMIC PROBLEMS
TYPES
AT HOUSEHOLD OR INDIVIDUAL LEVEL
AT GROUP LEVEL
o COMMUNITY (LOCAL)
o INDUSTRY
o REGIONAL

AT NATIONAL LEVEL
AT INTERNATIONAL LEVEL
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Econ. 11 - Introduction

ONE RECENT
SEMESTER, THE
FIRST LECTURE I
GAVE WAS ABOUT
THIS MAN!

MANNY
PACQUIAO!
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Econ. 11 - Introduction

LAST SEMESTER, I USED THE

THE SPELLING
BEE CONTEST!
AS THE TOPIC TO
ILLUSTRATE AN ECONOMIC
PROBLEM.
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Econ. 11 - Introduction

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THE 83RD NATIONAL SPELLING


BEE CONTEST IN THE US
THE
PARTICIPANTS
WERE 1114 YEAR
OLD
STUDENTS
FROM ALL
THE U.S.A.

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Econ. 11 - Introduction

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THE WINNER WAS THIS YOUNG PERSON ==

Anamika Veeramani, 14, of Ohio State USA.


She is from
India, the
parents are
probably
immigrants to
the US. She is
a natural born
American by
birth.

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Econ. 11 - Introduction

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WORDS SPELLED USED IN FINAL


ROUND

confiserie
netsuke
leishmanic
gnocchi
infundibuliform
epiphysis
tailleur
aguinaldo
terribilita
rhytidome
ochidore
juvia
stromuhr
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WORDS SPELLED
BEFORE THE
FINAL ROUND
schlieren
nahcolite
soubresaut
gyokuro
engysseismology
mauka
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CONTEST RULES
BEST CONTESTANTS FROM DIFFERENT
STATES (REGIONAL ELIMINATION)
THE SPELLING BEE AT NATIONAL
LEVEL BEGAN WITH 273 CONTESTANTS
CONTESTANTS APPEAR MORE REPRESENTATIVE OF AMERICAN
POPULATION AT THIS LEVEL

DEGREE OF DIFFICULTY OF ROUNDS OF


SPELLING LED TO 10 FINALISTS
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NAMES OF 10 FINALISTS &


THEIR ETHNIC ORIGIN
Joanna Ye (Asian)
Juliana CanabalRodriguez (Latino)
Aditya Chamudupathy
(Asian)
Andrew Grose
(American)
Laura Newcombe
(Chinese mother?)
Nov. 10, 2010

Adrian Gunawan
(Asian)
Laura Tang (Asian)
Elizabeth Platz
(American)
Shanta Srivatsa
(Asian)
Anamika Veeramani
(Asian)

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INTERPRETING THIS
SPELLING BEE CONTEST
FROM THE VIEWPOINT
OF THE STUDY OF

ECONOMICS
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ECONOMICS IS ABOUT
SCARCE RESOURCES (TIME, BUDGET,
INCOME, WEALTH, HELP)
CHOICES OF WHAT TO DO, WHAT TO
MAKE, WHAT TO USE TO SATISFY
HUMAN WANTS
MECHANISMS OF ARRIVING AT THESE
CHOICES (MARKETS, POWER, VOTING)
RULES OF BEHAVIOR THAT GOVERN
THESE CHOICES (INSTITUTIONS,
GOVERNMENT LAWS, CUSTOMS)
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SCARCE RESOURCES (TIME,


BUDGET, INCOME, WEALTH, HELP)
SPELLING BEE CONTESTANTS VIEWPOINT

INHERITED TALENT GENE (DNA) POOL


COULD BE EXCEPTIONAL
FAMILY SUPPORT PARENTS TIME &
ABILITIES
COMMUNITY SUPPORT SCHOOL
TEACHERS, PROGRAMS, ETC.
TIME PRACTICAL USE OF TIME
EFFORT PRACTICE, PRACTICE, STUDY,
STUDY
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CHOICES OF WHAT TO DO, WHAT TO


MAKE, WHAT TO USE TO SATISFY
HUMAN WANTS
(Contestant): STUDY OTHER SUBJECTS,
PLAY, NOT PARTICIPATE, ETC.
(Organizer): SCIENCE CONTEST,
STUDENT FAIRS, SPORTS
COMPETITION, ETC.

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MECHANISMS OF ARRIVING AT
THESE CHOICES (MARKETS, POWER,
VOTING)
MARKETS Interactions among Buyers
and Sellers; Users and Suppliers;
Participants and Watchers
CONTESTABLE MARKETS
Competition, fair rules, no use of unfair
power exercised
ADMINISTERED MARKETS Choice is
predetermined, rules could be biased, some
monopoly power exercised, crony choices
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RULES OF BEHAVIOR THAT GOVERN


THESE CHOICES (INSTITUTIONS,
GOVERNMENT LAWS, CUSTOMS)

DETERMINED RULES BY SOCIETY


Laws & political constitution, institutional
rules customary and adopted practice
SPELLING BEE CONTEST RULES
Developed by the organizers to determine
success & failure in spelling the word
chosen for the contestant
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SPELLING BEE CONTEST


OUTCOME - FACTORS
RULES ENABLED ELIMINATION OF THE
LEAST ABLE AMONG CONTESTANTS
UNTIL A CHAMPION WAS CHOSEN
AT THE HIGHEST LEVEL OF CHOICE AND
EVEN IN INTERMEDIARY STEPS
IMPORTANCE OF THE LUCK OF THE
DRAW THE WORD CHOSEN FOR THE
PARTICIPANT
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IN ECONOMICS,
RISK & UNCERTAINTY PLAY AN IMPORTANT
ROLE IN THE MARKET OUTCOME

LUCK OF THE DRAW


BAD LUCK
GOOD LUCK
RISK
UNCERTAINTY
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WHAT ATTRACTED ME ABOUT


THIS CONTEST IN USING IT
AS AN EXAMPLE FOR THIS LECTURE

IT DEMONSTRATES AN ASPECT OF
WHY AMERICA IS THE MOST
POWERFUL COUNTRY IN THE
WORLD ECONOMICALLY

INSTITUTIONAL RULES
CONTESTABILITY OF
MARKETS
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AMERICAN INSTITUTIONS:
POLITICAL CONSTITUTION (SUPREME
LAW OF THE LAND) FRAMED IN 1781
VERY SIMPLE:
DEFINED ONLY THE GOVERNMENT
NO RULES ABOUT ECONOMIC ISSUES EXCEPT
TO ALLOW FREE TRADE AMONG STATES

MOST MARKETS ARE CONSTESTABLE


A LOT OF COMPETITION IN ECONOMIC
MARKETS (INDUSTRY, CAPITAL, LABOR,
TECHNOLOGY)
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RELEVANCE TO THE SPELLING


BEE EXAMPLE - #1
IN THE 83 YEARS OF THE SPELLING
BEE CONTEST, 41 BOYS AND 44
GIRLS WON THE CONTEST
GIRLS AND BOYS HAVE EQUAL
OPPORTUNITIES
DOES THIS REFLECT SOCIAL &
ECONOMIC EQUALITY AMONG SEXES?

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RELEVANCE TO THE SPELLING


BEE EXAMPLE - #2
RECENT WINNERS OF THE CONTEST
HAVE COME FROM ETHNIC GROUPS
OTHER THAN TRADITIONAL
AMERICAN
CONTEST IS OPEN TO ALL WHO KNOW
THE SUBJECT
EQUALITY OF OPPORTUNITY MEANS
THAT THE CONTEST IS COMPETITIVE
OR CONTESTABLE!
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RELEVANCE TO THE SPELLING


BEE EXAMPLE - #3
SPELLING BEE CONTEST IS ONLY A
VERY TINY ASPECT OF AMERICAN
SOCIETY & ECONOMY
IT DEMONSTRATES THAT IT IS AN
OPEN ECONOMY COMPETITIVE IN
INDUSTRY
CAPITAL AND TECHNOLOGY
LABOR MARKET
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CONSIDER THESE PROPOSITIONS (STATEMENTS)

ABOUT THE PHILIPPINE


ECONOMY:
FOR DECADES, IT WAS HIGHLY
PROTECTED AND SHIELDED FROM
COMPETITION
WHAT THE ECONOMY NEEDS TO
BECOME BETTER IS GREATER
OPENNESS TO TRADE AND TO
COMPETITION
RESTRICTIVE LAWS NEED TO BE
REFORMED TO PERMIT MORE
COMPETITION AND EFFICIENT
GROWTH
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End of todays lecture.


Lecture #1
Good day!

Nov. 10, 2010

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