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Principles of Microeconomics

   

Added on  2021-06-14

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INTRODUCTION TO ECONOMICSPRINCIPLES OF MICROECONOMICS Lecture 1 Prepared by: Minh Huynh, PhD 1

Objectives2 ● 1.1. Explain what economics is about. ● 1.2. Construct and interpret the Production Possibility Frontier Curve. ● 1.3. Distinguish between Microeconomics and Macroeconomics; Positive economics & Normative economics. ● 1.4. Explain why trade makes everyone better off .

ContentsDefinition of Economics 1 The Production Possibility Frontier 2 Microeconomics and Macroeconomics 3 Positive Economics & Normative Economics 4 1 3 Interdependence and the Gains from Trade 5

● Economics is the study of how individuals and societies use/allocate limited resources to satisfy unlimited wants. ● The production possibility frontier is a graph showing the various combinations of output that the economy can possibly produce when all resources are being utilized in the most efficient manner, given the current level of technology. 4

● Economics is divided into two subfields: - Microeconomists study decision making by households and firms in the marketplace. - Macroeconomists study the forces and trends that affect the economy as a whole. 5

● A positive statement is an assertion about how the world is. ● A normative statement is an assertion about how the world ought to be. ● When economists make normative statements, they are acting more as policy advisors than scientists. 6

SUMMARY ● Interdependence and trade allow everyone to enjoy a greater quantity and variety of goods & services. ● Comparative advantage means being able to produce a good at a lower opportunity cost. Absolute advantage means being able to produce a good with fewer inputs. ● Trade makes everyone better off because it allows people to specialize in those activities in which they have a comparative advantage. 7

Introduction to Economics 1 1.1 Ten principles of economics 1.2. Think like an economist

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