Lecture 1

Question 1

Define the dangers of economic theories

Answer 1

• Theories are usually heavily simplified compared to reality
• Theories usually only deal with stable states (equilibrium)
• Theories hide political beliefs/agendas
  Theories cannot be tested

Question 2

Define trade

Answer 2

• the economic basis of society
• sellers, buyers
  • most important factors?
• reliable product (you get what you think you’re getting)
• reliable buyers and sellers (you don’t get ripped off)
  reliable exchange value (money)

Question 3

Define market

Answer 3

• where trade happens
• the collection of sellers, buyers, products and transactions
• how transactions operate – what controls prices, supplies etc
  · most important factors?
• price
• supply
• demand
  how these quantities are related through the functioning of the market and its traders

Question 4

Define money

Answer 4

• reliable (?) measure of value of traded products
  · most important factors?
• reliability – stability over time
• generality – its value applies across whole range of products
  acceptability – everyone agrees on its value

Question 5

Define choice

Answer 5

• how do you use economics to make the right decision?
  · most important factors?
• evaluation – combining cost, income, benefits
• comparison – measuring alternatives on the same ‘basis’
• time – how does the case change? How does this affect sustainability? How do we ensure decisions stay right in the long term?
  beyond economics – how to ensure factors such as ethics, safety, sustainability are properly included in the decision

Question 6

Define innovation

Answer 6

• how do you use ideas to change the economic and social landscape?
  · most important factors?
• vision – seeing what others might not
• overlapping – creating new ideas by putting together different visions
  the unknown – actions that lead to unpredictable consequences, otherwise outcomes cannot be new

Question 7

Define scales of economic analysis

Answer 7

• Microeconomics:
  ○ The way the market operates for one product or one ‘sector’ (related group of products)
• Macroeconomics
  The way the ‘aggregate’ market operates across all products, services, activities, eg ‘the UK economy’, ‘the Scottish economy’

Question 8

Define types of market

Answer 8

• ‘Perfect’ market:
  ○ Very large number of ‘agents’ selling and buying, no one individual or company can affect the market (change price or demand or supply)
  ○ Idealised! Probably almost never exists (nowadays)
• Oligopoly
  ○ A small number of large companies dominate
  ○ Much more common: eg telecoms, utilities, tech
• Monopoly
  ○ A single company controls whole market
  Usually a problem: exploitation, corruption, inefficiency…