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Introduction To Micro Economics Lecture 01

This document provides an overview of topics to be covered in a microeconomics lecture. Microeconomics examines the behavior of individual units like consumers and producers, and how they interact in markets. It studies how societies allocate scarce resources among competing ends. The lecture will discuss the themes of microeconomics like limited resources and trade-offs, the role of prices in market economies, and how economic theories and models are used. It will also cover the differences between positive and normative economics, define what a market is, and explore factors like competitive vs. non-competitive markets and how to determine a market's extent.

Uploaded by

Shanz Khan
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© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
147 views

Introduction To Micro Economics Lecture 01

This document provides an overview of topics to be covered in a microeconomics lecture. Microeconomics examines the behavior of individual units like consumers and producers, and how they interact in markets. It studies how societies allocate scarce resources among competing ends. The lecture will discuss the themes of microeconomics like limited resources and trade-offs, the role of prices in market economies, and how economic theories and models are used. It will also cover the differences between positive and normative economics, define what a market is, and explore factors like competitive vs. non-competitive markets and how to determine a market's extent.

Uploaded by

Shanz Khan
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Microeconomics

Lecture 1

Topics to be Discussed
The Themes of Microeconomics What Is a Market?

Economics
Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

Preliminaries
Microeconomics deals with: Behavior of individual units

When Consuming How we choose what to buy

Preliminaries
Microeconomics deals with: Behavior of individual units

When Producing How we choose what to produce

Preliminaries
Microeconomics deals with: Markets: The interaction of consumers and producers

Preliminaries
Macroeconomics deals with: Analysis of aggregate issues:
Economic Inflation Unemployment

growth

Microeconomics vs. Macroeconomics


The Linkage Between Micro and Macroeconomics Microeconomics is the foundation of macroeconomic analysis

Themes of Microeconomics
According to Mick Jagger & the Rolling Stones You cant always get what you want

Themes of Microeconomics
Why Not? Limited Resources Unlimited Wants

Themes of Microeconomics
Microeconomics Allocation of Scarce Resources and Trade-offs In a planned economy In a market economy

Themes of Microeconomics
Microeconomics and Optimal Trade-offs 1. Consumer Theory 2. Workers 3. Theory of the Firm

Themes of Microeconomics
Microeconomics and Prices The role of prices in a market economy How prices are determined

Theories and Models


Microeconomic Analysis Theories are used to explain observed phenomena in terms of a set of basic rules and assumptions.
For example The Theory of the Firm

The Theory of Consumer Behavior

Theories and Models


Microeconomic Analysis Models: a mathematical representation of a theory used to make a prediction.

Positive Versus Normative Economics


Positive Economics Positive economics deals with the observations or predictions of the facts of economic life. For example: What will be the impact of an increase in wages on the price of a product?

Positive versus Normative Economics


Normative Economics Normative Economics is the value judgments about how economics should operate, based on certain moral principles or preferences?
For example:

What wage rate should be paid to the auto workers to make them an active member of the society?

What is a Market?
Markets A geographically defined area where buyers and sellers interact to determine the price of a product or a set of products.

What is a Market?
Markets vs. Industries Industries are the supply side of the market.

What is a Market?
Defining the Market The market parameters must be set before an analysis of the market can take place.

What is a Market?
Arbitrage Buying a product at a low price in one location and selling at a high price in another

What is a Market?
Competitive vs. Noncompetitive Markets Competitive Markets
Because of the large number of

buyers and sellers, no individual buyer or seller can influence the price.
Example: Most agricultural markets

What is a Market?
Competitive vs. Noncompetitive Markets Noncompetitive Markets
Markets where individual producers

can influence the price.


Example: OPEC

What is a Market?
Market Price Competitive markets establish one price. Noncompetitive markets may set many prices for the same product.

What is a Market?
Market Definition - The Extent of a Market Market Definition Which buyers and sellers should be included in a given market

What is a Market?
Market Definition - The Extent of a Market Market Extent Defines the boundaries of the market Geographic Range of products

What is a Market?
Examples Geographic boundaries Gold: Lahore vs. Karachi Housing: Islamabad vs. Rawalpindi

What is a Market?
Examples Range of Products Gasoline: regular, super, & diesel Cameras: Polaroid, point & shoot, digital

What is a Market?
Examples Markets for Prescription Drugs Well-defined markets - therapeutic drugs Ambiguous markets - painkillers

Summary
Scope of Microeconomics Themes of Microeconomics Limited Resources & Trade-offs Prices Theories & Models

Summary
Positive vs. Normative Economics Markets Market Defined Competitive vs. Non-competitive Markets Market Extent

End of lecture 1

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