Introduction to microeconomics ch 1Presentation Transcript
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
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
Scarcity, Goods and Bads
wants are greater than our resources
Not possible to buy everything Problem of scarcity
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)
Economics divided into four parts
Scope of economics
Subject matter of economics
Nature of economics
Limitations of economics
Aristotle: economic management of state and household
Adam smith: enquiry into nature and causes of wealth
Marshall: material requisites of welfare
Efforts of human beings
To acquire scarce resources
For satisfaction of unlimited wants
i) economic activities : kinds & objectives
ii) economic systems
iii) economic policies
Nature of economics
Systematic body of knowledge
Observation of facts
Solution to the problem
Practical basis of assumptions
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.
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
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
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