Why study economics? Economic success Good decisions Good analysis and forecasting Economics... Starting point of economics: Universal law of scarcity Definition of a scarce
Trang 1Vietnam-Netherlands Master Program
on Development Economics
Course:
Microeconomics
By Nguyen Phan, Ph.D
Trang 2Chapter 1
Preliminaries
Trang 3Why study economics?
Economic success Good decisions
Good analysis and forecasting Economics
Trang 4What is Economics?
No unique concept
Conventional concept: Economics is a
social science that studies the allocation of scare resources to competing uses in order
to maximize the benefit of individuals,
organizations and economy
A different perspective: Economics as a
science studying markets (James Buchanan)
Trang 5 Starting point of economics: Universal law
of scarcity
Definition of a scarce resource: at zero
price, demand exceeds supply
Law of scarcity: Conflict between unlimited
human wants and their limited resources
Consequence of scarcity: Man must
Trang 7 Microeconomics deals with:
Behavior of individual units
Trang 8 Macroeconomics deals with:
Analysis of aggregate issues:
Trang 10Theories and Models
Microeconomic Analysis
Theories are used to explain observed phenomena in terms of a set of basic rules and assumptions
For example
The Theory of the Firm
The Theory of Consumer Behavior
Trang 11Theories and Models
Microeconomic Analysis
Models:
a mathematical representation of a theory used to explain or make a prediction
Trang 12Theories and Models
Trang 13Theories and Models
Microeconomic Analysis
Evolving the Theory
Testing and refining theories is central to the development of the science of
economics
Trang 16trade-What is a Market?
Market: Collection of buyers and sellers
that, through their actual or potential interactions, determine the price of a product
or set of products
Extent of a market:
Geography
Product range
Trang 19Real Versus Nominal Prices
Nominal price is the absolute or current price of a good or service when it is
sold.
Real price is the price relative to an
aggregate measure of prices or
constant price.
Trang 20Real Versus Nominal Prices
The Consumer Price Index (CPI) is an aggregate measure.
Real prices are emphasized to permit the analysis of relative prices
Trang 21Real Versus Nominal Prices
Calculating Real Prices
year
current year
current
year base
Price Nominal
x CPI
CPI Price
(base year = 100)
Trang 23 Positive and normative issues.
A market refers to a collection of buyers
and sellers who interact and to the possibility for sales and purchases that results from that interaction.
Trang 25End of Chapter 1