SCHOOL OF ECONOMICS

1. Why study Economics in Commerce? • MYTH : Economics is all about MONEY… • Economics is not all about money. Economics is the study of human behaviour. Economics is not just a set of facts or theories, economics gives you a way to think about the world. It helps you to make sense of the decisions people make everyday: how much to spend, what job to choose, how much government spends on education, how much government taxes South African citizens and businesses. • Economics affects our daily lives. We are continuously made aware of local, regional and international economic issues. Issues such as prices, inflation, trade, unemployment, globalization are all economic concepts. We introduce these ideas to you in first year Economics courses: • MICROECONOMICS I and MACROECONOMICS I. • Microeconomics I introduces you to concepts such as the problem of scarcity, demand, supply, consumer behavior, producer behavior, wages, income, inequality, poverty and international trade. We show you how these concepts affect our daily lives. We answer questions such as: • How do I decide what I should buy at the supermarket? • Given the choice between two items, which do I choose? • Why do firms choose labour-intensive production processes rather than capital- intensive production processes? • Should I go to university or should I try to find a job now? • Why do stores have ‘sales’? • How responsive is demand to changes in the prices of items such as DVD’s, PS2 games, movies? • Macroeconomics I introduces students to concepts such as inflation, unemployment, balance of payments and exchange rates. We answer questions such as: • Why do economies sometimes grow rapidly, while at other times they suffer from recession? • Why, if people want to work, do they sometimes find themselves unemployed? • Why do economies experience inflation (rising prices), and does it matter if they do? • Why do exchange rates change and what will be the impact of such changes on imports and exports? • What is the impact of progressive tax systems on an economy? • What are business cycles and why do they occur? • What is GDP and does it include the informal sector? ECONOMIC MYTHS Economics is all about MONEY A First-year student had the following to say about this myth: “Economics is not about the money. Economics is a social science as well. Economics is about the demand and supply. There is microeconomics and macroeconomics (looking at the big picture).” Tax cuts help the economy by “putting money in the consumers’ pockets” The right tax cuts help the economy by creating incentives to work and save. Free gifts are free. The economists’ motto is There ain’t no such thing as a free lunch! This simple statement is the root of the economists’ problem, opportunity cost. Economic theory says that whatever goods and services are provided, they must be paid for by someone. GDP is a valid measure of human well-being and progress. GDP is not a valid measure of human wellbeing as it does not capture the material wellbeing of society but rather a monetary wellbeing that usually does not approximate the average person in society. Budget deficits are bad Budget deficits are bad when they are used to fund current consumption or wasteful expenditure. Budget deficits are bearable, beneficial or even necessary when used for public investment or to assist the economy in times of severe recession. SCHOOL OF ECONOMICS Freakonomics, inside one economist’s mind… “Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? What kind of impact did Roe v. Wade have on violent crime? These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded young scholar who studies the riddles of everyday life-from cheating and crime to sports and child-rearing — and whose conclusions regularly turn the conventional wisdom on its head. He usually begins with a mountain of data and a simple, unasked question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: Freakonomics” Some of our leading research economists… Below: Corné van Walbeek Research Focus: Tobacco Left: Edwin Muchapondwa Research Focus: Environmental Economics Left: Murray Leibbrandt Research Focus: Labour & Poverty Right: Nicoli Nattrass Research Focus: HIV/Aids Right: Lawrence Edwards Research Focus: International Trade Above: Johann Fedderke Research Focus: Growth Theory & Macroeconomics