Lecture 1: Public Finance

INTRODUCTION TO ECONOMIC
CONCEPTS

Dr. Yara El-Sehaimy

Yabdelkhalek@ecu.edu.eg
 Who Am I?
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 Dr. Yara El-Sehaimy

 Graduated from GUC with triple majors in Economics,

Finance, and Strategic Management.

 I earned my master in 2019, and PhD in 2023 both in

Economics.

 My area of interest is Macroeconomics, Developmental

Economics, Low-Income Countries (LICs), Econometrics.
 Teaching Believes
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 Education is a bidirectional process; we both learn from

each others.

 Don’t postpone studying; this concept is just not working

with my courses!

 Whenever you don’t understand anything just ask! It is

really that simple.

 Check the course outline for any announcements or even

amendments in the course deadlines.
 Course Work
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 20% Midterm 1, 20 MCQs.

 20% Midterm 2, 4 essay questions.

 40% Final, 40 MCQs.

 20% Course Work

 10% Quizzes.
 10% Participation.
 Course Material
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 Lecture Slides

 Lecture Notes

 Tutorial Sheets

 Textbook: Public Finance A Contemporary Application of

Theory to Policy by David Hyman
 Soft Copy Link:
Chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.uv.mx/personal/clelanda/files/2014/09/Hyman-David-
2011-Public-Finance.pdf
Lecture 1: Public Finance

INTRODUCTION TO ECONOMIC
CONCEPTS
 Outline
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 Introduction - When it all started?-

 What is economics?

 How people make decision?

 How people interact?

 How the economy as whole works?

 Conclusion
 When It All Started?
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 In 1776, 18th century.

 Adam Smith in his book “Wealth

of Nations” observed a pattern in
goods consumption.

 He concluded that, we have

limited/scarce resources with
unlimited needs and want.

 So he started to ask, how can we

efficiently allocate recourses.

 This is how economics came to

life!
 Economics
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 The study of how society manage to efficiently allocate its

scarce recourses.

 It is a social science that studies the decision-making

process of allocating resources efficiently by households,
firms, and governments.

 Economics has 10 main principles to study the following:

 How people make decisions?
 How people interact?
 How the economy as whole works ?
 How People Make Decision?
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 Principle #1: People Face Tradeoffs

 Main tradeoff of the societies: helping unemployed people from the
taxes of the employed one.

 Principle #2: The Cost of Something is What You

Give Up To Get It.
 Opportunity cost: the cost of the forgone benefit/second best choice.

 Principle #3: Rational People Think at the Margin

 Marginal benefit > Marginal cost.

 Principle #4: People Respond to Incentives

 How People Interact?
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 Principle #5: Trade Can Make Everyone Better

Off
 Specialization as a form of efficient allocation of recourses.

 Principle #6: Markets Are Usually a Good Way to

Organize Economic Activity
 Markets
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Price Supply = Producers

P* Equilibrium

Demand = Consumers

Q* Quantity

Through pricing mechanism, markets are able to efficiently

allocate the scare resources
 How People Interact?
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 Principle #5: Trade Can Make Everyone Better

Off
 Specialization as a form of efficient allocation of recourses.

 Principle #6: Markets Are Usually a Good Way to

Organize Economic Activity
 Pricing mechanism.

 Principle #7: Governments Can Sometimes

Improve Market Outcomes
 Market failure
How The Economy As Whole Works?
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 Principle #8: A Country’s Standard of living

Depends on Its Ability to Produce Goods and
Services.
 GDP = C + I + G + NX
 Budget Surplus, equilibrium, deficit.
 GDP↑, economy expand, employment opportunities ↑, living
standers higher.
 Stabilization Policies: Fiscal Vs Monetary.

 Principle #9: Prices Rise When the Government

Prints Too Much Money
 When money↑ without ↑in production, ⸫ inflation.
How The Economy As Whole Works?
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 Principle #10: Society Faces a Short-Run

Tradeoff between Inflation and Unemployment
 15 Minutes
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How to Send a Professional E-mail?

 Thank You!
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