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Introduction to Microeconomics Basics

This document introduces microeconomics. It discusses that microeconomics studies the behavior of individual economic units like households and firms and how they interact in markets. It also discusses that economics addresses three basic questions - what, how, and for whom goods and resources are produced. Additionally, it explains that economic agents like households, firms, and the government make choices to optimize benefits, profits, and social welfare respectively due to scarce resources. Opportunity cost and marginal thinking are important tools used in making economic choices.

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Phan Nguyễn Thiên Trang
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89 views5 pages

Introduction to Microeconomics Basics

This document introduces microeconomics. It discusses that microeconomics studies the behavior of individual economic units like households and firms and how they interact in markets. It also discusses that economics addresses three basic questions - what, how, and for whom goods and resources are produced. Additionally, it explains that economic agents like households, firms, and the government make choices to optimize benefits, profits, and social welfare respectively due to scarce resources. Opportunity cost and marginal thinking are important tools used in making economic choices.

Uploaded by

Phan Nguyễn Thiên Trang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

CHAPTER 1

INTRODUCTION TO MICROECONOMICS

Content

 Microeconomics
 Basic questions in economics
 Economic choice

1
Chapter 1: Introduction

I. Microeconomics
1. The economy
Household

Input market Government Output market

Firm

I. Microeconomics
1. The economy

- There are at least 3 members in any economy, which


interacting with each other in a certain regime.

 Interacting regimes:
- planning economy (1)
- market economy (2)
- mixed economy (3)
1 3 2

Cuba US, UK,


Hong
Japan...
Kong

2
I. Microeconomics
2. Some definitions

Scarcity: When the needs are greater than the


supplying ability

Commodities: Tools to satisfy people’s needs


Resources: Inputs used to produce commodities to
satisfy people’s needs, including:
+ Labour (L)
+ Materials (M)
+ Capital (K)

I. Microeconomics
3. Microeconomics and macroeconomics

 Economics: study how society allocates scarce


resources for competitive goals
 Microeconomics:study the behavior of each
member in the economy
 Macroeconomics: study the economy as a whole
Microeconomics Macroeconomics Econometric

ECONOMICS

3
II. Basic economic issues

 3 questions
WHAT?

HOW?

FOR WHOM?

III. Economic choice

1. Choice’s principles
- Need to choose because of scarce resources. If
resource is already spent on A, it can not be spent on B
- Many ways to spend resources → easy to choose

2. Choice’s target
- Household: Optimize benefit
- Firm: Optimize profit
- Government: Optimize social welfare

4
III. Economic choice

3. Choosing tool
- Opportunity cost (OC): The value of the best missed
chance when making a choice
- Marginal thinking
+ Marginal cost (MC): The change in total cost resulting
from a change from quantity
∆TC
MC = = TC '( Q )
∆Q
+ Marginal benefit (MB): The change in total benefit
resulting from a change from quantity
∆TB
MB = = TB '( Q )
∆Q

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