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INTRODUCTION TO MICRO-

ECONOMICS

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MICRO ECONOMICS

Introduction

Micro EconomicsSmaller picture-basic theories

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ECONOMICS

Micro Economicsbasic theories

Macro Economics

Big picture-national economy

What is Micro Economics?

� The analysis of the decisions made by individuals

and groups, the factors that affect those decisions,

and how those decisions effect others

� It considers decisions by both firms and individuals

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� It considers decisions by both firms and individuals

are motivated by cost and benefit considerations.

� Costs can be either in terms of financial costs such

as average fixed costs and total variable costs or

they can be in terms of opportunity costs, which

consider alternatives foregone.

Conti..

� The general concern of microeconomics is the

efficient allocation of scarce resources between

alternative uses

� But more specifically it involves the determination

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� But more specifically it involves the determination

of price through the optimizing behavior of

economic agents, with consumers maximizing

utility and firms maximizing profit."

Need and Significance

� Essential for understanding total economic

system

� Helpful in- solving of economic problems

Deciding economic policy� Deciding economic policy

� Economic decision of individual unit

� Enquiring about economic welfare

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Limitation

� Study of industrial units only

� Unrealistic assumption

� Study of a part of economy only

Few specific problems only� Few specific problems only

� Limited study of economic problems

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What we will learn in this subject?

� Basic concepts, types of specialization, globalization ,

money and exchanges

� Governments role in economy and business

regulations

� Types of markets, wages and incomes, International

trades

� Concepts of demand, utility and elasticity, monopoly,

costs of production and product markets

� Natural resources, economic inequality and public –

goods and choices

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