|Welcome to Microeconomics
|Overview of the semester:
- goals and expectations
- textbook used for the semester
- course web site information:
- 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
- The three core issues that must be resolved are:
The Economy is "US"
- WHAT SHOULD BE PRODUCED with our limited resources
- HOW SHOULD WE PRODUCE the goods and services we select
- FOR WHOM should the goods and services be produced; that
should get them
Scarcity is the CORE Problem
- “The Economy” is simply an abstraction that refers to the
sum of all
individual production and consumption activities
- scarcity refers to the fact that available resources are
satisfy all desired uses
|What Topics Do We Study?
- how consumers, firms, and society chooses the goods and
services to produce and buy
- price determination
- the economic way of thinking
- opportunity cost
- the idea of maximization
- choices are made at the margin
- The most desired goods or services that are forgone in
to obtain something else.
- Everything we do involves an opportunity cost.
|What Economics is All About:
- Understanding how economies function is the basic purpose
- we seek to know how an economy is organized, how it
behaves, and how
it achieves it basic objectives
- Economists don't formulate an economy’ objectives.
focus on the means available for achieving given goals
- Macroeconomics versus Microeconomics
- Macroeconomics is the study of aggregate economic
behavior, of the
as a whole.
- Microeconomics is the study of individual behavior in 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
- normative statement -- a statement that makes a normative