This document provides an introduction to microeconomics. It defines microeconomics as studying decision-making by individuals, households, firms, and industries. The document outlines key concepts in microeconomics including markets, prices, supply and demand. It discusses how price is determined by the interaction of supply and demand in a market. The document also differentiates microeconomics from macroeconomics and provides examples of measuring price changes using consumer price indexes.

1. INTRODUCTION TO
MICROECONOMICS
BY
TIRIMBA IBRAHIM

2. REFERENCE BOOK
1. Economics by David Begg, Giantluigi
Vernasca, Stanley Fischer, Rudiger
Dornbische,10th edition
2. Principles of Microeconomics by N.
Gregory Mankiw, 3rd Edition

3. OPENING QUOTE
• “Microeconomics is about money
you don't have, and
macroeconomics is about money the
government is out of.” P.J.
O’ROURKE

4. • "Economics is the science of choice.
• It began with Aristotle but got mixed up with
ethics in the Middle Ages.
• Adam Smith separated it from ethics, and
• Leon Walrus mathematized it.
• Alfred Marshall tried to narrow it, and
• Keynes made is fashionable.
• Robbins widened it, and
• Samuelson dynamized it, but modern science
made it statistical and tried to confine it again.

5. • There is an economics of money and trade,
of production and consumption, of
distribution and development.
• There is also an economics of welfare,
manners, language, industry, music, and
art.
• There is an economics of war and an
economics of power.
• There is even an economics of love.

6. Why Economics Exist...
• Economics is concerned with scarcity. If
something is not scarce, there is no
economic problem.
• Scarcity means there is a shortage, and
hence there must be a choice from amongst
the few
• However, despite scarcity being a reality,
consumers are rational and out of the
minimum supply they want maximum
satisfaction

7. • Economics uses theory to explain actions
and predict future actions. For example if:
the Bulls are in the playoffs, then there will
be a larger number of people wanting tickets
than if they have a poor season. If there is
high unemployment, then at the university
more students enroll in business courses
because their opportunity costs (pay loss
due to being in class) are less.

8. TYPES OF ECONOMICS
• Normative Economics => What should be
done. “The governement should increase
interest rates to decrease inflation rate."
• Positive Economics => What will happen,
not what should be done. "An increase in the
property tax in the area of Jig Jiga will tend
to lower the price of apartments, everything
else equal."

9. NOTE
• In economics we shall mostly be
refering to the principle of CETERIS
PARIBUS which means...’everything
else equal’ or ‘all factors held constant,”
so take note!

10. BRANCHES OF
ECONOMICS
• We have 2 main branches of
Economics namely:
1.Microeconomics
2.Macroeconomics

11. Micro versus Macro
• Macroeconomics -- The branch of
economics that studies decision-making
for the economy as a whole
• Microeconomics -- The branch of
economics that studies decision-making
by a single individual, household, firm,
industry, or level of government

12. • In this unit, we shall
concentrate our study on
Microeconomics

13. Focus on Microeconomics
Markets
Price

14. What is a market?
• A market is the collection of buyers and
sellers that, through their actual or
potential interactions, determine the
price of a product or set of products. A
market includes more than an industry
(a collection of firms that sell the same
or closely related products).

15. What is Price?
• Price is the amount of money that has to be
paid to acquire a given product
• Price for any specific good/service is the
relationship between the forces of supply and
demand.
• Price mechanism is the outcome of the free
play of market forces of demand and supply.
However, sometimes the government controls
the price mechanism to make commodities
affordable for the poor people too.

16. MEASURING PRICE
• The CPI measures price changes by buying a
market basket of goods at different times.
• CPI means CONSUMER PRICE INDEX
• CPI is a comprehensive measure used for
estimation of price changes in a basket of
goods and services representative of
consumption expenditure in an economy

17. MEASURING CPI
• CPI can be measured by use of 2
approaches:
1.Laaspye Formula
2.Paachae Formula
3.Fisher Ideal Index formulae
-Lets have a look unto the formulas

18. We start the mathematics of
Leon Walrus now….
Your calculators ready

19. THE END