This document provides an overview of microeconomics. It defines economics as the study of how societies allocate scarce resources to produce goods and services. Microeconomics focuses on individual economic units like consumers, producers, and resource owners. The key elements of economic activity are human wants, scarce resources, and production techniques. Resources include labor, capital, land. Markets allow firms to sell goods/services and households to buy them in a circular flow. The economic system establishes rules for carrying out economic activity. Market structures include perfect competition, monopoly, oligopoly, monopolistic competition, and monopsony.

1. MICROE CONOMICS
Lecture 1
Charm Sanglay

2. ECONOMICS
• Comes from the Greek word
“Oikonomia” which means
“management of the
household”

3. • The study of how societies choose to use
scarce productive resources that have
alternative uses, to produce commodities of
various kinds, and to distribute them among
different groups. (Paul Samuelson and
William Nordhaus)
• The study of how individuals and society in
general make choices that involve the use of
scarce resources from among alternative
wants that need to be satisfied.( Gerardo
Sicat)

4. • A social science that studies the
optimum allocation, over time,
of scarce human and non-human
resources among their
alternative uses in order to
satisfy unlimited human wants
and needs. (Bernardo Villegas)

5. Economics -
• A social science that deals with
the allocation of scarce resources
to the production of goods and
services to satisfy unlimited
human wants.

6. Economic Activity
• Is the interaction among economic
units involved in the production,
exchange and consumption of goods
and services

7. 3 Key Elements of an Economic
Activity
• Human wants
• Resources
• Techniques of production

8. A. HUMAN WANTS
• Is the motivating force of economic
activity: their fulfillment maybe
thought of as end or goal of
economic activity

9. Origin of Wants
• They arise for what the human organism
need in order to continue functioning
• They arise too, from the culture in which
we live for every society dictates certain
requisites for the “good life”
• Finally, wants are generated by the
activity necessary to satisfy other wants

10. Characteristic of
Human Wants:
•Varied (different kinds
•Insatiable (cannot be
satisfied)

11. B. RESOURCES (factors of
Production)
• Are the means available for
producing goods that are
used to satisfy wants

12. a. Types of Resources
• Land Resources- Consist of lands and
natural resources used to produce goods
• Labor Resources – consist of labor power
or the capacity for human effort both
mind and muscle used in producing
goods
• Capital Resources – consist of all goods
that are used to produced other goods
• Entrepreneur

13. b. Characteristics of Resources
• Most resources are limited in
quantity or scarce
• They are versatile
• They can be combined in varying
proportions

14. C. TECHNIQUES OF
PRODUCTION
• Know-how and the physical
means of transforming
resources into want-
satisfying form.

15. BRANCHES OF ECONOMICS
• Microeconomics – deals with the
problems and analysis of individual
economic unit.
a. consumer/household
b. producer/seller
c. resource owner

16. • Macroeconomics- deals with the
problems of the whole economy
and interrelationships of
aggregate economic units.
a. household sector
b. business sector
c. government sector
d. foreign sector

17. Figure 1 The Circular Flow of
Economic Activity
MARKETS
Revenue FOR Spending
GOODS AND SERVICES
•Firms sell Goods and
Goods
•Households buy services
and services
sold bought
FIRMS HOUSEHOLDS
•Produce and sell •Buy and consume
goods and services goods and services
•Hire and use factors •Own and sell factors
of production of production
Factors of MARKETS Labor, land,
production FOR and capital
FACTORS OF PRODUCTION
Wages, rent, •Households sell Income
and profit •Firms buy

18. Economic System
- An institutional framework with
which economic activity is carried
out
- Particular, body of laws, habits,
ethics, and customs (religious or
otherwise) that a group of people
observe to satisfy their material
wants

19. General Types of Economic Systems
• Free Enterprise Economy –
characterized by private ownership
of resources as well as goods and
services
• Command Economy – resources,
goods, and services are owned by
the state and controlled by the
government

20. Four Basic Problems of any
economy/economic System
1. What to produce?
2. How to produce?
3. How much to produce?
4. For whom the goods are to be
distributed?

21. Market
-A place where buying and selling
takes place or a point where the
forces of price mechanism could
take place

22. Types of Market
• Perfect Competition
• Monopoly
• Oligopoly
• Monopolistic Competition
• Monopsony

23. A. Perfect Competition
• Occurs in an industry when there
are many small producers who are
selling an identical product with easy
entry.

24. Characteristics:
• Many buyers and sellers
• The product is homogeneous( the
goods and services sold by different firms are
largely the same.)
• Freedom of entry and exit
• Perfect information about market
conditions ( buyers & sellers are well informed about what
products are available and at what prices)

25. B. Monopoly
• Is a market situation in which only
one firm sells a product for which
there is no good substitute
Ex. meralco
PAL

26. C. Oligopoly
• A market structure in which there
are few sellers.
Example: oil and telecommunications
industries

27. D. Monopolistic Competition
• A market structure in which many
firms sell products that are close but
not perfect substitutes. Products are
differentiated by quality, packaging,
and supplementary services.
Ex. Textile products, soap, perfumes

28. E. Monopsony
• A market situation in which
there is only one buyer.
–ex. Agricultural products, Co-
say is using monopsony (offers
low-price on commodity)