microeconomics, chapter 01 explain the introduction of microeconomics

its the brief explanation about chapter 01 microeconomics the introduction of microeconomics

1. 1
Chapter 1
Introducing Economics

2. 2
Definition of Economics
The study of how society
chooses to allocate its
scarce resources to the
production of goods and
services in order to satisfy
unlimited wants.

3. 3
Microeconomics vs.
Macroeconomics
•Macroeconomics
The branch of
economics that
studies decision-
making for the
economy as a
whole
•Microeconomics
The branch of
economics that
studies decision-
making by a
single individual,
household, firm,
industry, or level
of government

4. 4
What is
Ceteris Paribus?
A Latin phrase that means
that while certain variables
can change, “all other
things remain unchanged”

5. 5
BASIC CONCEPTS:
•Scarcity-the scarcityrefers to
limitations–limited goods or services,
limited time, or limited abilities to
achieve the desired ends.
•Choice–Because individuals
and society can never have
everything they desire, they
therefore are forced to make choices
•Opportunity cost –It is the cost of
the Next best alternative sacrificied in
order to produce a good

6. 6
1.Land Resource -any natural resource
provided by nature
2.Labour -The mental and physical capacity
of workers to produce goods and services
3.Capital -The physical plants, machinery,
and equipment used to produce other
goods
(Financial capital -The money used to
purchase capital)
4.Entrepreneurs -The creative ability of
individuals to seek profits by combining
resources to produce innovative products
Factors of Production

7. 7
Land
Labor
Capital
Entrepreneurship organizes
resources to produce goods
and services

8. 8
Graphs provide a means to clearly
show economic relationships in two-
dimensional space. Economic analysis
is often concerned with two variables
confined to the upper right-hand
(northeast) quadrant of the coordinate
number system.
Graph

9. 9
A shift in a curve occurs only
when the ceteris paribus
assumption is relaxed and a third
variable not on either axis of the
graph is allowed to change which
means to say both of axis variable
change simultaneously instead of
third variable
Shift in Graph

10. Moment along the Graph
•The moment along the graph is quite be
differ from shift of the graph, here only
one Axis variable change instead of
both, so that there is pivot in graphical
representation. Here we considered the
assumption of Ceteris paribus(Other
things remains constant). There is no
changes with third variable.
10

11. 11
Marginal Analysis
-An examination of the effects of
additions to or subtractions from a
current situation
The word “marginal” means
“additional.” We can also say that
it is the difference between new
one and old one

12. 12
Production Possibilities
Curve (PPC/PPF):
-A curve that shows the
maximum combinations of
two outputs that an
economy can produce,
given its available
resources and technology
with given time period.

13. 13
Technology:
The body of knowledge
and skills applied to
how goods are
produced

14. 14
A
B
Military Goods
Consumer Goods
Unattainable
Inefficient
Production Possibilities Curve
Efficient

15. 15
•A production possibilities curve
illustrates an economy’s capacity to
produce goods, subject to the constraint
of scarcity.
•The production possibilities curve is a
graph of the maximum possible
combinations of two outputs that can
be produced in a given period of time,
subject to three conditions:
Production Possibilities Curve

16. 16
(1) All resources are fully
employed
(2) The resource base is not
allowed to vary during the time
period.
(3) Technology, which is the
body of knowledge applied to the
production of goods, remains
constant.

17. 17
•Inefficient production occurs at any
point insidethe production possibilities
curve.
•All points alongthe curve are efficient
points because each point represents a
maximum output possibility.
•All points outsidethe curve are
unattainable due to scarcity of resources.
Points “inside”, “along” and
“outside” the PPC

18. 18
•PPC is usually concave to the origin
because of the law of increasing opportunity
coststhat states that the opportunity cost
increases as the production of an output
expands.
•The explanation for the law of increasing
opportunity costs is that the suitability of
resources declines sharply as greater
amounts are transferred from producing one
output to producing another output.
The shape of PPC

19. 19
Economic Growth
•The ability of an economy to
produce greater levels of output,
represented by an outward shift of
its production possibilities curve as
a result of an increase in resources
or an advance in technology

20. 20
A
Military Goods
Consumer Goods
Increase in Resources
B

21. 21
Agriculture
Manufacture
Technological Advance in
Manufacturing Sector

22. 22
Increase in
Resources
Balanced
Economic
growth

23. 23
Technological
advance
Unbalanced
Economic
growth

24. 24
-The fundamental economic questions facing any
economy are What, How, and For Whomto
produce goods.
-The WHAT question asks exactly which goods
are to be produced and in what quantities.
-The HOW question requires society to decide the
resource mix used to produce goods.
-The FOR WHOM problem concerns the division
of output among society’s citizens.
Basic Economic Problems