Principles of Microeconomics: Lecture 1 - Course 701020

This document presents an introductory lecture on the principles of microeconomics. It begins by defining economics and its core concepts, including scarcity and the allocation of resources. The lecture then explores the production possibility frontier, illustrating the various combinations of output an economy can produce efficiently. It differentiates between microeconomics and macroeconomics, positive and normative economics, and explains the benefits of trade and specialization. The document delves into ten key principles of economics, covering decision-making, incentives, market dynamics, and the role of government. It emphasizes how individuals and societies make choices in the face of scarcity, the importance of opportunity cost, and how markets can organize economic activity. The lecture concludes with a summary of the main points, reinforcing the importance of understanding economic principles for informed decision-making and understanding the world around us. This resource is available on Desklib, a platform offering study tools for students.

INTRODUCTION TO ECONOMICS
PRINCIPLES OF MICROECONOMICS
Lecture 1
Prepared by: Minh Huynh, PhD
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Objectives
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● 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 .

Contents
Definition of Economics
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The Production Possibility Frontier2
Microeconomics and Macroeconomics3
Positive Economics & Normative Economics4
1
3
Interdependence and the Gains from Trade5

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

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1.1. TEN PRINCIPLES OF ECONOMICS
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701020 - Giới thiệu về kinh tế học 10
• Scarcity: limited social resource nature.
• Economics: the study of how
societies
manage scarce resources. For example:
– How do people decide what to buy, work, save and
how much to spend?
– How does the enterprise decide how much
production, how many workers are hired?
– How does society decide to divide resources between
defense, consumer goods, environmental protection
and other needs?
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HOW PEOPLE MAKE
DECISIONS
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HOW PEOPLE MAKE DECISIONS
• Attending a dinner party before the mid-term
exam will have less time spent studying.
• To have more money to buy things you love will
have to work harder and less rest time.
• Protecting the environment requires resources
that cannot be used to produce consumer goods.
Principle # 1: Every decision involves trade-
offs
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