We are going to build economic intuition and vocabulary, useful for anyone heading into banking, insurance and investment. Also, we are going to present the core models of Economics.

This is a 6 ECTS course, with 168 total hours of work. We have 13 weeks (including the midterm), leading to 39 to 42 (if you count the final) hours in class room. This means you are expected to dedicate, along the semester, 126 hours of self study to this course.

The syllabus maps every session to chapters in all four. Inside the decks, a 📖 note at the foot of a slide tells you exactly which section an example came from, and links straight to it in the free online book. 🔖

To pass: at least 10 out of 20, the weighted average rounded to the nearest integer, so a 9.50 average already passes.

The resit is on 29/01/2027 at 13:00, and it is open to everyone, including anyone who took the tests and did not pass. 📅

Session 7 is the midterm, so there is no session 7 deck. One theme per session, and every part of every session ends in exercises. 🧩

Part 0 · What is economics? The subject, its two levels, and the difference between describing and prescribing.

Part 1 · How does one agent choose? Surplus, opportunity cost, sunk costs, and choosing at the margin.

Part 2 · How does a whole society choose? Specialization, the production possibilities frontier, and why its shape is the same opportunity cost, scaled up.

We follow a constructivist approach in each of the major modules. 🧱

✅ D. Only D claims something about what is, and the claim can be checked against data. A and C carry an explicit “ought” and an explicit ranking. B looks factual but hides a value judgment in the word too: how high is too high is not something data can settle.

a) The street itself: a fixed quantity of space with competing uses (cars, pedestrians, deliveries, parking). Space is scarce in exactly the sense of this part, and no amount of money makes the street wider.

b) (i) positive, a testable claim about what would happen. (ii) normative: “should”, plus a ranking of whose interests count. (iii) positive, a number that can be checked against the accounts.

c) Micro. One agent, one decision, one small market for one piece of space. The macro version would ask about output or employment in the whole economy, not in one street.

Read the right hand side. What option 1 truly costs is what you pay for it, plus the surplus you gave up by not taking the best alternative.

Opportunity cost: your own cost, plus the surplus of the best alternative you turned down.

So the whole rule is benefit > opportunity cost, and it holds for exactly one option: the best one.

Internship: opportunity cost \(= 0 + 1800 = 1800\), and \(2000 > 1800\). Rational. ✅

Summer school: opportunity cost \(= 1200 + 2000 = 3200\), and \(3000 < 3200\). Not rational. ❌

Note the summer school has the larger benefit and still loses.

An additive constant does not move an argmax:

\[\arg\max_{a} \big[\, f(a) - k \,\big] \;=\; \arg\max_{a} f(a)\]

So the ticket price cannot change the decision. 🎟️

The discrete condition compares totals, in euros. The continuous one compares marginals, in euros per hour. On an interval the rival to \(q\) is \(q + \Delta q\): divide the surplus difference by \(\Delta q\), then let \(\Delta q \to 0\), and the comparison becomes \(B'(q)\) against \(C'(q)\).

✅ D. Rationality is \(B_1 - C_1 > B_2 - C_2\), which is \(B_1 > C_1 + (B_2 - C_2)\). Option C is only the implicit half; the money you hand over is a cost too.

a) Differentiate the totals: \[MB(q) = B'(q) = 90 - 15q, \qquad MC(q) = C'(q) = 30 + 15q\]

b) Set \(MB = MC\): \(90 - 15q = 30 + 15q \Rightarrow 60 = 30q \Rightarrow q^{*} = 2\) hours, where \(MB = MC = 60\) euros per hour.

c) \(B(2) - C(2) = (180 - 30) - (60 + 30) = 150 - 90 = 60\) euros. It really is a maximum: \(B'' - C'' = -15 - 15 < 0\). ✅

Ana is better at both jobs: 12 against 6, and 6 against 4. She has the absolute advantage everywhere.

And yet Bruno should write the software, because he gives up only 1.5 loaves for each unit while Ana gives up 2. Lower opportunity cost, so he goes first.

Comparative advantage: producing something at a lower opportunity cost than someone else.

Up to 4 units of software, Bruno does it, and each costs 1.5 loaves. That is the flat stretch.

Past 4, Bruno is fully occupied and only Ana is left. Each further unit now costs 2 loaves. The line gets steeper.

So the frontier bends because the cheap capacity runs out first. 📐

🔵 On the curve (A): all resources are used. This is efficient.

🔴 Inside the curve (B): waste, idle resources. This is inefficient.

🟢 Outside the curve (C): desirable, but unattainable with today’s resources and technology.

Keep the two words apart: inside is a waste, outside is a limit.

Marginal rate of transformation: how much \(y\) the economy must give up to get one more unit of \(x\).

Which is to say: the opportunity cost of software, measured in bread, for a whole economy. On the kinked frontier the \(MRT\) was 1.5, then 2. 🔁

The economics is the kink argument with more producers: resources are not equally suited to the two uses, and the best suited are moved first. Each further unit costs more than the last.

A straight frontier would say every resource is equally good at both jobs, so the order of switching would not matter.

The country with the lower opportunity cost in a good has the comparative advantage in it, and should produce it. Ana was better at everything in absolute terms, and Bruno still wrote the software. 🌐

That is the basis of international trade. And what a country gains by doing it can be read straight off the frontier we just drew. 👇

scarcity → opportunity cost → comparative advantage → specialization → exchange. ⛓️

Production never left the frontier. It is consumption that moved out to the line, and the shaded region between the two is the gains from trade.

Point A sits on the line, at zero trade (autarky). Whatever the price, the bundle the economy produced is still available to it. ✅

And the frontier is concave, so the tangent line lies weakly above it everywhere: no bundle that was attainable before the price existed becomes unattainable now.

Why produce at A? Where the frontier is flatter than the price line, a unit of software costs the economy less bread than the market pays for it, so it should make more. That stops exactly where \(MRT\) equals the price ratio, which is where the line is tangent. 🎯

Producing at A while consuming elsewhere on the line is specialization and exchange, drawn. Where the price comes from, and how two countries split these gains, is session 13. 🔁

✅ D. Absolute advantage compares output levels; comparative advantage compares what each gives up. Ana was better at both and still handed the software to Bruno, because he sacrificed less bread for it. C is impossible: the two opportunity costs are reciprocals, so nobody can be lower in both.

a) \(y(0) = 100\) tonnes. \(y(8) = 100 - 64/4 = 84\) tonnes.

b) \(MRT(x) = -\,\mathrm{d}y/\mathrm{d}x = x/2\).

c) \(MRT(8) = 4\) tonnes, \(MRT(16) = 8\) tonnes. The 16th unit costs twice as much bread as the 8th. 📈

d) \(y'' = -1/2 < 0\), so yes, and equivalently \(MRT' = 1/2 > 0\). Economically: resources are not equally suited to both uses, so the ones moved into software first are those least productive in bread, and every further unit costs more than the last. ✅

⚖️ Scarcity means resources are limited and wants are not, so every choice gives something up.

💰 Surplus \(B - C\) turns “is this worth doing?” into one number, and that is what makes options comparable.

💶 Opportunity cost is what you pay plus the surplus you forgo, so the rule is benefit above opportunity cost.

➕ Choices are marginal: \(MB = MC\) is the first order condition of \(\max B(q) - C(q)\), and sunk costs drop out because constants do not move an argmax.

📐 The PPF is that logic for a whole economy. Its slope is the MRT, and it is concave because the best suited resources are used first.

🌍 Differences in opportunity cost are comparative advantage, which is why we specialize and exchange. Session 13 turns it into trade.