Microeconomics Unit 1. Economics is … Social science Efficient use of limited or scarce resources...
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Transcript of Microeconomics Unit 1. Economics is … Social science Efficient use of limited or scarce resources...
Microeconomics Unit 1
Basic Economic Concepts
Economics is …Social scienceEfficient use of limited or scarce resourcesMaximum satisfaction of human economic
wantsStudy of scarcity and choice
Scarcity isimbalance between limited resources
and unlimited human wants.
Basic Economic Concepts
Market economies are …Decentralized decisionsMany firms and individuals
Command Economies are …Publicly ownedCentral authority makes decisions
Individual choice is …Decisions on what and what not to do.
Basic Economic Concepts
Why have most command economies failed and
most market economies succeeded?
???????
Incentives$$$$$$$PriceProfit
Property rightsEnjoy the rewards of the investment
Basic Economic Concepts
What are resources?
?????????
CAPITAL
LABORLAND
ENTREPRENEURSHIP
Scarcity requires that choices be made.
Choices imply that things are given up.
Basic Economic Concepts
1. Define resources.2. List the four categories of resources.3. What characteristic of resources results in
the need to make choices?
Warm-up
Opportunity Cost is …Real cost of something you give up to get
something else
Marginal Benefit (MB) is …Additional benefit received from a choice
Marginal Cost (MC) is …Additional ‘cost’ of a choice
Marginal Analysis is …‘weighing’ the MB and the MC of a choiceMB >= MC DO IT; MB <= MC DO NOT!!
Basic Economic Concepts
Microeconomics is …How individuals make decisionsHow these decision interactChoices made by individuals, household or
firmsSmaller parts of the whole economy
Basic Economic Concepts
Macroeconomics is …Overall ups and downs of the global economyEconomic aggregates
Unemployment, inflation, gross domestic produce
Summarize data across many different markets
Bigger picture
Basic Economic Concepts
Positive economics is …Answers questions about the way the
world works.‘What will’ or’ what will be’.NO value judgments.
Normative economics is …Says how the world should work.‘What should be’.Value judgments – ‘right’, wrong’, ‘best’.
Basic Economic Concepts