Introduction to microeconomics ch 1

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  • 1. Microeconomics
  • 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
  • 11. Nature of economics
  • 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