1 / 8

Principle of Microeconomics

Principle of Microeconomics. Dr. Ou Hu Webpage: www.as.ysu.edu/~ohu Office Hours :13:00-15:00, MTR and by appointment. Chapter 1: What is Economics?. Economics – the social science that s tudies how people (individuals, firms, government) make choices under the condition of scarcity.

lydie
Download Presentation

Principle of Microeconomics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Principle of Microeconomics Dr. Ou Hu Webpage: www.as.ysu.edu/~ohu Office Hours:13:00-15:00, MTR and by appointment

  2. Chapter 1: What is Economics? Economics – the social science that studies how people (individuals, firms, government) make choices under the condition of scarcity. • Without the problem of scarce resources, there would be no economic issues. • Economics analyzes how people achieve their goals – maximizing gratification, profit, and social welfare, etc. with limited resources.

  3. What is Economics? Economic ways of thinking - • Scarcity principle • Cost-Benefit principle • Incentive principle • Comparative Advantage principle • Increasing Opportunity Cost principle • Efficiency principle • Equilibrium principle To apply those principles in the understanding of economic issues and in the decision-making processes faced by individuals, firms, and government.

  4. What is Economics? • The Principle of Scarcity • People have to face trade-offs when their boundless desires meet limited resources. • To choose one more unit of A means to give up a certain amount of B. • The Cost-Benefit Principle • One chooses one more unit of A only if the benefit of doing so is at least as large as its cost. • Example: • Gas station X vs. Gas station Y • Speeding to work or school

  5. What is Economics? • Opportunity Cost (of an activity) • The value of what must be given up most unwillingly in order to undertake the activity; • Examples: • the oppt. cost of going to college; • the oppt. cost of investing $1000 in a stock market; • the oppt. cost of watching a movie the night before the final exam of Econ 2610. • The best alternative; • Explicit and implicit costs; • Understanding opportunity cost helps us efficiently allocate scarce resources.

  6. What is Economics? • Marginal Analysis • Marginal Cost - the increase in total cost from one additional unit of an activity. • Average cost is total cost divided by the total number of units. • Marginal Benefit – the increase in total benefit from on additional unit of an activity. • Average benefit is total benefit divided by the total number of units. • An activity will be undertaken only if its marginal benefit is at least as large as its marginal cost.

  7. What is Economics? • Marginal Analysis: NASA Space Shuttle • If the marginal benefit is $6 billion per launch, how many launches should NASA make? What if the marginal benefit is $10?

  8. What is Economics? • What is Microeconomics? • The study of economic choices or decisions made by individuals and firms. • How prices are determined in individual markets? • What factors affect supply and demand in a particular market? • Assuming rationality • Rational agent strives to maximize the chances of success, where success is defined as the achievement of some desired (well-defined) outcome. (fromWikipedia)

More Related