Introduction to microeconomics ch 1
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Microeconomics studies how individuals and firms make choices given scarce resources and analyzes how supply and demand determine prices and quantities of goods and services in markets. It examines how resources are allocated most efficiently among alternative uses and how goods and services are distributed among different groups in society. The goal is to understand the workings of individual parts of the economy in order to assess policies and provide insights on efficient resource use, business decisions, and economic welfare.
Introduction to microeconomics ch 1
- 2. What is economics? It is the choices that people and society have to make. E.g. Buying a CD or buying a book E.g. Buying a car or buying a house E.g. Providing health care facilities or building infrastructure E.g. Whether to go to college, and if so, which one
- 3. Why Study Economics? it touches every part of life looking at how people value products looking at the most efficient or cost effective ways of creating a product how the economy works a better understanding of investments and how domestic and foreign economies effect your personal investments and wealth
- 4. Scarcity, Goods and Bads wants are greater than our resources Not possible to buy everything Problem of scarcity
- 5. Contd.. An item that costs something is called scarce . Anything with a price on it is called an economic good —these include goods and services . A free good is a good for which there is no scarcity. An economic bad is anything you want to get rid of (pollution, disease, garbage)
- 6. Economics divided into four parts Wealth definition Welfare definition Scarcity definition Growth definition
- 7. Scope of economics Subject matter of economics Nature of economics Limitations of economics
- 8. Subject matter Aristotle: economic management of state and household Adam smith: enquiry into nature and causes of wealth Marshall: material requisites of welfare
- 9. Contd... Robbins: Efforts of human beings To acquire scarce resources For satisfaction of unlimited wants
- 10. Contd... Modern economists: i) economic activities : kinds & objectives ii) economic systems iii) economic policies
- 12. Contd... Science Systematic body of knowledge Observation of facts Measurement Explanation Verification Art Practical application Solution to the problem Realistic situation Practical basis of assumptions
- 13. Microeconomics is a branch of economics that studies how the individual parts of the economy, the household and the firms, make decisions to allocate limited resources , in markets where goods or services are being bought and sold.
- 14. Micro economics Studies: How resources are allocated to the production of goods and services How goods and services are distributed among the people How efficiently they are distributed
- 15. Importance of microeconomics To understand the working of the economy To provide tools for economic policies Helpful in the efficient use of resources Help to businessmen Helpful in understanding the problem of taxation Helpful in understanding the conditions of economic welfare
- 16. Limitations of microeconomics Based on unrealistic assumption of full employment Based on the assumption of no interference of government Is concerned with the study of parts and not whole