Scribd
Upload
2 views

Introduction To Microeconomics - Some Introductory Concepts

Uploaded by

shakibhasanovi86
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
2 views

Introduction To Microeconomics - Some Introductory Concepts

Uploaded by

shakibhasanovi86
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

Introduction to Microeconomics-

Some introductory concepts


Faculty -CNQ
Economics , Macroeconomics and
Microeconomics
⚫Economics is a social science that studies the
choice that people make as they scope with
scarcity .
⚫Macroeconomics is the branch of economics that
deals with the entire economy as a whole for e.g.-
High unemployment of a country is a
macroeconomic topic.
⚫Microeconomics is the branch of economics that
studies the functioning of individual markets ,
individual industries , individual firms and
individual households . For e.g. Talking about Mr.
Rahim’s firm employment structure.
Why we study Economics ?
⚫To learn a way of thinking , the study of
economics helps us to make decisions.
⚫To understand how the economy functions
⚫To understand global affairs ( the global
economy).
⚫To be an informed voter .
Economics as a Social science
Positive Economics Normative Economics
⚫ Without making ⚫ It looks at the outcomes of
judgments about economic behavior and
asks if they are good or
whether the outcomes bad and whether they can
are good or bad be made better .
⚫ A positive statement is ⚫ How things ought to be.
about what is . ⚫ Normative statements
⚫ Positive statements can involve value judgments
and cannot be tested.
be checked by looking at
⚫ E.g. Government of
the facts . Bangladesh should invest
⚫ E.g. Bangladesh is a more in agricultural sector
developing country. .
Some commonly used terms in economics
⚫Good –Anything from which individuals
receive utility or satisfaction.
⚫Bad –Anything from which individuals receive
disutility or dissatisfaction. Good and Bad
both can be tangible or intangible.
⚫Utility- The satisfaction one receives from the
good.
⚫Disutility-The dissatisfaction one receives
from a bad.
Resources/Factors of production
⚫It takes Resources to produce goods ,
resources are divided into four broad
categories
1. Land
2. Labor
3. Capital
4. Entrepreneurship
Some more key concepts –Scarcity, Choice
and Opportunity Cost
⚫Scarcity – Resources are limited , wants
exceeds the resources available to satisfy them.
-There are unlimited wants and limited resources
- Scarce means limited.
- Because of scarcity , there is a need for a
rationing device . A rationing device is a means
of deciding who gets what quantities of the
available resources and goods.
- Scarcity implies competition.
Scarcity and Choice

⚫Human wants are unlimited but resources are


limited, limited resources makes individuals
or societies to choose .
⚫Scarcity implies choice. So the concept of
choice comes .
⚫There is tradeoff between any two choices.
⚫When we make choices the concept of
Opportunity cost arises .
Opportunity cost
⚫A fundamental concept in Economics is the
concept of the opportunity cost- the most
highly valued opportunity or alternative
forfeited when a choice is made.
⚫There is tradeoff between any two choices
⚫E.g. – The opportunity cost of using resources
for medical care is the value of the other goods
that could be produced with the same
resources.
⚫The reason opportunity cost arises because
resources are scarce.
Economic way of thinking
⚫Margins and Incentives
⚫People make choices at the margin, which
means that they evaluate the consequences of
making small incremental changes in the use of
their resources.
⚫The benefit from pursuing an incremental
increase in an activity is its marginal benefit.
⚫The opportunity cost of pursuing an incremental
increase in an activity is its marginal cost.
⚫These are both best thought of as rates – how
much benefit or cost for a one-unit chang
Economic way of thinking
⚫Margins and Incentives
⚫Marginal benefit and marginal cost act as
incentives — inducements to take a particular
action or not.
⚫For any activity, if marginal benefit exceeds
marginal cost, people have an incentive to do more
of that activity
⚫If marginal cost exceeds marginal benefit, people
have an incentive to do less of that activity.
⚫Economists seek to predict choices by looking at
changes in incentives, that is, in marginal cost and
benefit.

You might also like