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Land Economics

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Grading is based on

i. Attendance 10%

ii. Assignment 30%

iii. Final exam 60%

Aim of this module is to examine land, property and

planning from an economic perspective

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What is Economics?

Scarcitya basic human dilemma Limited resources vs. unlimited wants

The human condition requires making choices

Definitions of Economics Mankiws definition

is the study of how society manages its scarce resources

Hedricks definition

is how society chooses to allocate its scarce resources amongcompeting demands to improve human welfare

Alternative definitions

what economists do.

is the study of choice.

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Fundamental Questions of Economics - Scarcity

requires all societies to answer the following

questions: What is to be produced?

How is to be produced?

Forwhom will it be produced

WHFM Questions

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Why do Economists Study Human

Behavior? Scientists versus policy makers

Positive Economics Descriptive - what the world is like.

Objective- value judgments need not be made

Positive statements can theoretically be tested byappealing to the facts

Normative Economics

Prescriptive - what the world ought to be like Subjectivevalue judgments must be made

Normative statements cannot be tested appealing tofacts.

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Categories of Basic Principles of

Economics How do people make decisions?

How do people interact?

How does the economy work overall?

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How Do People Make Decisions?

Principle #1 - People face tradeoffs

Time allocationan example of tradeoffs

Efficiency versus equity

Production Possibilities Frontier

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Principle #2 - The cost of something is what

you have to give up to get it

The real costs of developing Kampung Baru atKuala Lumpur

Idea of redevelop Collesium Theatre

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Principle #3 - Rational people think at the

margin

Rational or irrational decision-making

Marginal benefits and costs versus total benefits

and costs

Weighing marginal costs and benefits leads tomaximizing net benefits (total welfare)

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Principle #4People respond to incentives

Reactions to changes in marginal benefits and costs

Increases (decreases) in marginal benefits mean more(less) of an activity

Increases (decreases) in marginal costs mean less

(more) of an activity

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How Do People Interact?

Principle #5 - Trade can make everybodybetter off

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Principle #6 - Markets are usually a good way oforganizing economic activity

feudal times where feudal states were self-supporting,

the benefits of trade are so powerful that people beganto trade

the failure of centrally planned economies and themovement towards markets for the WHFM questions

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Principle #7 Governments can sometimes improveinteraction that occurs in markets

there are circumstances when market signals fail toallocate resources efficiently or equitably

Public Goods, Externalities and Income Distribution

Some goods or services that people desire will not beproduced by markets (e.g. lighthouses).

Some goods or services will either be underproduced(low cost houses) or overproduced (pollution) becausemarkets fails to register certain benefits or costs.

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markets may also fail to provide an equitable or fair

distribution of resources

government intervention with its ability to coerce (the

opposite of voluntary) can regulate, tax and subsidize to

change market outcomes

efficiency and equity: the pie analogy

if government intervention always the proper solution?

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How Does the Economy Work as

a Whole? Principle # 8A countrys standard of living

depends upon its ability to produce goods andservices

Adam Smiths An Inquiry into the Nature and theConsequences of the Wealth of Nations

Materialismmore toys mean more welfare

wealth: a necessary or sufficient condition for

happiness (are rich people happier, citizen with lots ofhouses are happy)

leisure time and productivity

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Principle #9The general level of prices riseswhen the government prints and distributes toomuch money

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