Macroeconomics

Tutorial 1: Introduction
Economic Models
Supply and Demand

Tutor: Elisa Da Vià

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Getting to know each other

Elisa Da Vià
E-mail: e.da.via@hum.leidenuniv.nl

Office hours: By appointment only

Interests: Political economy, Political Ecology, Food and agrarian studies

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Outline of today’s session
• Introduction to the Course
• Lectures
• Tutorials
• Practicalities
• Guidelines for tutorials
• Tutorial Assessment: In-class assignments
• Today’s Topics:
• What is economics?
• Principles of Economics
• Models in Economics

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Introduction I
• Components of the Course
• Weekly lectures
• Biweekly tutorials

• Final Course Grade

• Tutorials 30%
• Midterms 30%
• Exams. 40% (in case of resit, exams constitutes 70% )

• 5.5 Rule for Pass

• Weighted average of midterms and finals should be above 5.5
• Resit grade should be above 5.5

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Introduction II
• Textbook
• Krugman and Wells, Macroeconomics, 2018 Fifth Edition, Worth
Publishers

• Preparing for Tutorial Sessions

• Prepare for the lecture (read relevant chapter for the week)
• Come to tutorials with your questions
• Actively and constructively participate in class

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Your roles in the tutorials
• Attendance
• Attendance is compulsory
• In case of absence, it is possible to attend another
workgroup, but you won’t get credit for your in-class
assignment
• Mobile phones should be switched off at all times
• Other matters
• Enrol into your group on Blackboard
• Regularly read your student emails and BB for updated
information

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Tutorial assessment
• Tutorial Grades (30%)

• 4 best out of 5 In-class assignments (7.5 % each)

• no resits for assignments in case of absences

• a mock assignment today

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Today’s agenda: learning objectives
• What is economics?
• 12 basic principles of economics and their application
to real-life situation
• Models in economics
• Two models: production possibility frontier and
demand- supply model

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What is economics?

 Pick up a slip of pape

 Read the principle
 Think of an example/situation that
combines the principle you picked
with the one your neighbor picked
 Write down your example

7 minutes

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12 basic principles of economics
1. Choices are necessary because resources are scarce
2. The true cost of something is its opportunity cost
3. ‘How much’ is a decision at the margin
4. People usually respond to incentives
5. There are gains from trade
6. Markets move toward equilibrium
7. Resources should be used efficiently to achieve society’s goals
8. Markets usually lead to efficiency
9. When markets fail government intervention can improve society’s welfare
10. One person’s spending is another person’s income
11. Overall spending sometimes get out of line with the economy’s productive
capacity
12. Government policies can change spending

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15 min

BREAK

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Economic models: the why and how
A model is simplified representations of reality
• used to better understand a real-life situation
• isolate the effects of one change at a time

Ceteris paribus: Other things equal assumption

• All other relevant factors remain unchanged

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Production Possibility Frontier
Efficient

• A model for thinking about

trade-offs facing an economy Not feasible
• A visual model of scarcity &
efficiency
• Simplification: one economy/ two
goods
• Shows the maximum quantity of
one good that can be produced
for any given quantity of the Feasible but
other good. not efficient

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Economic models
• What do you see here?
• What does an economist see here?

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Economic models
• Let add some details:
• What does the vertical line Price Supply
represent?
• The horizontal one?
• The upward- sloping one?
• The downward-sloping
one?

Demand
Quantity

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Demand curve
A Demand Curve for Gasoline
• A demand curve
shows the quantity
demanded at
various prices
• The quantity
demanded is the
quantity that buyers
are willing and
able to purchase at
a particular price
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Changes in demand vs. changes in
quantity demanded

• A change in quantity demanded occurs

when there is a change in the price of the
good itself ->> a movement along the
demand curve
• A change in demand occurs when there
is a change in another variable other than
the price of the good itself
->> a shift of the demand curve
• Causes of a shift in demand curve:
changes in the prices of substitute
and complementary goods, change in
income, change in tastes

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Supply curve

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Mock in class-assignment

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For next session…
• Read chapters 4 and 5 and Kitroeff (video podcast)
• Come to the tutorial with your questions and/or email
your questions beforehand

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