MICROECONOMICS

Prof. Robert Magda PhD

[email protected]
Hungarian University of Agriculture and Life Sciences, Gödöllő
The topics and detailed syllabus of the factual content
of the course-unit in a weekly
1. Week Introduction to the Economics
2. Week Basics of market economy – demand, supply
3. Week The market supply and equilibrium
4. Week Elasticity
5. Week Utility, indifference curve, budget line
6. Week Production in short run
7. Week First Midterm Exam (20 October, 2021)
8. Week Production in long run
9. Week The cost of production
10. Week Different market forms – competitive market, monopoly
11. Week Production factors
12. Week Second Midterm Exam (1 December, 2021)
13. Week Replacement and improvement of the first and second Midterm
Exams
Compulsory literature:
➢ Robert Magda: Microeconomics. PPT’s of lectures
Suggested literatures:
➢ N. Gregory Menkiw: Principles of Microeconomics 2017,
Cengage Learning, Inc., Mason, OH, US, ISBN-13:
9781305585126
Inquiry, Evaluation:
− Inquiry, evaluation: There will be two Midterm Exams among the semester, which
will be online. 50 points can be achieved with the Midterm Exams. A student who
did not write the Midterm Exam(s) during the semester due to a justified reason – at
the time and the form determined by the department – in the last week may also write
or improve them. In the case of the improvement the last result will be valid, even it
is less than the original score.
− Semester will finish with a written exam. The final mark will consist of two parts –
Midterm Exams and Final Exam. A student who does not achieve 40% (20 points)
of the points that can be obtained during the semester cannot receive a signature
and will not apply to the final exam.
− Exam questions require knowledge of basic concepts and theoretical contexts. We
will decide the method of the examination depending on the pandemic situation,
which we will notify you.
Final Exam: Written

Calculation of the final mark:

Points available : - Final written exam: 50 point
- 2 Midterm Exams: 50 point
Summary: 100 point
Marks available based on scores achieved:
21 – 50 point fail (1)
51 – 60 point pass (2)
61 – 70 point satisfactory (3)
71 – 84 point good (4)
85 – 100 point excellent (5)
It is also possible to improve the successful exam.
Economics is the science of
the choices people make to
cope with scarcity.

. . . The word economy comes from a Greek

word for “one who manages a household.”
THE MAIN PARTS OF ECONOMICS
• Microeconomics focuses on the individual parts of the
economy.
• How households and firms make decisions and how
they interact in specific markets
• Macroeconomics looks at the economy as a whole.
• Economy-wide phenomena, including inflation,
unemployment, and economic growth
International economics
 Thinking Like an Economist
Economics trains you to. . . .
Think in terms of alternatives.
Evaluate the cost of individual
and social choices.
Examine and understand how
certain events and issues are
related.
 THE ECONOMIST AS A SCIENTIST
The economic way of thinking .
..
Involves thinking
analytically and objectively.
Makes use of the scientific
method.
 The scientific method: observation, theory and
more observation
Uses abstract models to help explain how a complex, real
world operates.

Develops theories, collects, and analyzes data to evaluate

the theories.
The role of assumptions
• Economists make assumptions in order to make
the world easier to understand.
• The art in scientific thinking is deciding which
assumptions to make.
• Economists use different assumptions to
answer different questions.
 Economic models
• Economists use models to simplify reality in order to
improve our understanding of the world
• Two of the most basic economic models include:
• The Circular Flow Diagram
• The Production Possibilities Frontier
 The circular flow diagram shows the income
received and payments made by each sector of the
economy.

Everyone’s expenditure is someone else’s receipt. Every transaction must have

two sides.
Microeconomics is the study
of the decisions of people
and businesses and the
interaction of those decisions
in markets.
 WHAT ARE THE MOST
IMPORTANT QUESTIONS OF
ECONOMICS?
• WHAT?
• HOW?
• WHOM?
•What goods and services will be
produced and in what quantities?
•How will the various goods and
services be produced?
•Who(m) will consume the various
goods and services?
 ECONOMY
The ECONOMY is a mechanism
that allocates scares resources
among alternative uses.
Who are the economic
actors?

• Households
•Firms
•Goverment
•A household is any group of people living
together as a decision-making unit.
•A firm is an organisation that uses
resources to produce goods and services.
•A government is a many layered
organisation that sets laws and rules,
operates a law-enforcement mechanism.
 PRODUCTION
The process of using the services of
labour and capital together with other
inputs (such as land, materials, and
fuels) to make goods and services
available.
WHAT ARE THE FACTORS
OF PRODUCTION?
• Labour
• Capital
• Natural resources
• Entrepreneurial ability
Labour is the time and effort
that people devote to
producing goods and
services.
The return to labor is the
wage.
 LAND is all the natural
resources used to produce
goods and services.
The return to land is rent.
Capital is all the equipment, buildings, tools, and
other manufactured goods used to produce other
goods and services.

The return to capital is interest.

Enterpreneurial ability is a special type of human
resource that organizes the other three factors of
production, makes business decisions, innovates,
and bears business risk.
Enterpreneurship is rewarded with profit.
 WHAT MOTIVATE THE
PRODUCTION?
DEMAND
It is an inside absence which renews time
to time.
What can solve the
absence?
Goods
Services
What kind of goods?
• economic goods
(table, pen,etc.)
• free goods
(air, wind, etc.)
•public goods
(public road, public domain,etc.)
• private goods
(my car, my house, etc.)
 What kind of services?
•material services
(packaging,
delivering,warehousing, etc.)
•non-material services
(education, culture, public health,
etc.)
When wants exceed the resources
available to satisfy them, there is
scarcity.

The benefit or satisfaction that a

person gets from the consumption of
good or service is called utility.
 Coordinating Decisions
•market economy
(price, what, how, when, where, who)
•command mechanism
(hierarchical organisation structure)
•mixed economy
(relies on both markets and command
mechanisms)
 Production Possibility Frontier
Points of the PPF and inside it are attainable,
and points outside the PPF are unattainable.
Points on the PPF are efficient, and points
inside it are inefficient.
Choosing among efficient points on the PPF
involves a trade-off and an opportunity cost.
• Concepts Illustrated by the Production Possibilities
Frontier
• Efficiency
• Tradeoffs
• Opportunity Cost
• Economic Growth
 OPPORTUNITY COST
The opportunity cost of producing
an additional unit of one good is the
decrease in the number of units of
another good that can be produced.
 Production Possibility Frontier

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