Welcome to Microeconomics
Overview of the semester: 
  • We strive to produce more output from existing resources.
    • for the most part, this has been driven by necessity
  • Economics is the study of how best to allocate scarce resources among competing uses.
  • The three core issues that must be resolved are:
    1. WHAT SHOULD BE PRODUCED with our limited resources
    2. HOW SHOULD WE PRODUCE the goods and services we select
    3. FOR WHOM should the goods and services be produced; that is, who should get them
  • The Economy is "US"
    • “The Economy” is simply an abstraction that refers to the sum of all our individual production and consumption activities
  • Scarcity is the CORE Problem
    • scarcity refers to the fact that available resources are insufficient to satisfy all desired uses
What Topics Do We Study?
  1. scarcity
  2. how consumers, firms, and society chooses the goods and services to produce and buy
  3. price determination
  4. the economic way of thinking
    • opportunity cost
    • the idea of maximization
    • choices are made at the margin
Opportunity Costs:
  • The most desired goods or services that are forgone in order to obtain something else.
  • Everything we do involves an opportunity cost.
What Economics is All About:
  • Understanding how economies function is the basic purpose of studying economics.
    • we seek to know how an economy is organized, how it behaves, and how successfully it achieves it basic objectives
  • Economists don't formulate an economy’ objectives.  Instead, they focus on the means available for achieving given goals
  • Macroeconomics versus Microeconomics
    • Macroeconomics is the study of aggregate economic behavior, of the economy as a whole.
    • Microeconomics is the study of individual behavior in the economy, of the components of the larger economy.
The Economists' Tool Kit:
  • economic models
    • simplification of the real world
  • testing of hypotheses
    • a statement that can be disproved but never proved
  • ceteris paribus
    • latin for "all other things unchanged"
    • often necessary for economists to test a hypothesis in a complex, ever-changing world
  • the fallacy of the false cause
    • confusing association with causation
  • economic assertions
    • positive statements -- a statement of fact or a testable hypotheses
    • normative statement -- a statement that makes a normative judgment

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this page is maintained by Reed Fisher
last updated January 15, 2011