Ilmu Ekonomi
Pertemuan 1
Prodi PIWAR Politeknik APP Jakarta
Today’s content ☀
- housekeeping
- about studying economics
- some main principles
About the content of PIR2317 📚
- This course is based on Krugman and Wells (2016).
- covered are principle of microeconomics:
- Supply and demand
- the market and its limitation
- and macroeconomics:
- GDP, inflation, unemployment, the government
- What does it mean for business
- books can be useful but are not required.
Your convenors
The course conveners are I Made Krisna (Imed) & Intan Vierke.
Contact us anytime but we may have delayed responses. Alternatively just show up to our offices.
Some expectations from student
- No prior knowledge is required.
- We do expect you to understand Cartesian Plane.
- Please be active and ask questions.
- Do your assignments & be active.
- No cheating! Especially during exams.
- Please enrol to 2024_ilmu_ekonomi at e-learn.
Some rules
- The lectures will be about 1.5 - 2 hours length.
- I expect all students to pay attention.
- Feel free to interrupt my class with questions.
- email me at imade.krisna@poltekapp.ac.id
- Typical length of course is $$120 mins
Structure of this course
- week 1: introduction
- housekeeping
- some principles
- week 2: supply and demand
- supply and demand curves
- perfect market equilibrium
- week 3: Meddling with the market
- tax and quantity control
- price elasticity
- week 4: firm problem
- production function
- marginal cost and average cost
- perfect competition
Structure of this course
- week 5: Monopoly & oligopoly
- price discrimination
- game theory intro
- week 6: Externalities & public goods
- deviation from perfect market
- policies that work
- week 7: Welfare
- Poverty & inequality
- firms under different welfare setting
*** MIDTERM EXAM ***
Structure of this course
- week 8: Macro basics
- accounting and growth
- inflation and international imbalances
- week 9: GDP, inflation and unemployment
- Measuring economy and price
- unemployment
- week 10: Long run growth
- Dynamics of economic growth
- Aggregate demand and supply
- week 11: Fiscal policy
- demand shock
- the state budget
Structure of this course
- week 12: Financial system
- Banks and money
- The central bank
- week 13: Monetary policy
- interest rate
- central bank instruments
- week 14: international economies
- trade policy
- international capital and exchange rate
Evaluation ✍🏾
| evaluation | covers | % |
|---|---|---|
| Group assignment | contextual | 40 |
| midterm exam | first 7 meetings | 30 |
| final exam | all meetings | 30 |
- Slides should be enough to get a good grade.
- However, to get an A, you should master the principle.
- The more logic you use, the less memory you’re going to need.
Assignment
- You’re divided into 7 groups! (you should already have a group by next week!)
- each group writes a paper (makalah) & a presentation slide.
- During a group’s presentation, others ask questions (at least 1 per group)
- Presentation will begin in week 4.
- I will randomize which groups do what.
Assignments
| group | Topic | coverage | meeting |
|---|---|---|---|
| 1 | Elasticity & tax | demand of cigarettes & the effectiveness of excise | 4 |
| 2 | Oligopoly | Analyzing the market dynamics of matic scooter | 7 |
| 3 | Inflation | what is inflation, how’s it measured, and its dynamics | 9 |
| 4 | Economic growth | Compare Indonesia vs China vs South Korea growth from 1960-recent | 10 |
| 5 | Financial system | Describe what is money, what is digital money, and difference between conventional system vs sharia | 11 |
| 6 | International trade | Analyze beef import quota, the good, the bad | 13 |
| 7 | International finance | 1998 financial crisis: how it started & ended | 14 |
About economics
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
- Is minimum wage good?
- Should we introduce tax holiday to firms?
- Should the government increase expenditure by more tax or more debt?
- 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.
Principles of Economics 💰
People make choices
because resources are scarce
resource can be anything you use to produce.
Money is the most mainstream limited resource.
- Buy only one holiday package.
- Buy only one portion of nasi goreng.
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
- 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 AWS?
- Use tokopedia instead of making your own e-store.
- 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 quality.
- 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.
Next week: Supply and demand
Ilmu Ekonomi Pertemuan 1 Prodi PIWAR Politeknik APP Jakarta