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    EC 131 Introduction: 1. Introduction To Microeconomic Analysis 2. Price Determination

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    Plaxedes
    This document provides an introduction to microeconomic analysis and price determination. It discusses key microeconomic concepts such as scarcity, opportunity cost, the production possibilities frontier (PPF), and the assumptions of the PPF. The document explains that microeconomics is concerned with individual decision making and resource allocation, while macroeconomics looks at aggregate variables for the overall economy.

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    EC 131 Introduction: 1. Introduction To Microeconomic Analysis 2. Price Determination

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    Plaxedes
    67 views11 pages
    This document provides an introduction to microeconomic analysis and price determination. It discusses key microeconomic concepts such as scarcity, opportunity cost, the production possibilities frontier (PPF), and the assumptions of the PPF. The document explains that microeconomics is concerned with individual decision making and resource allocation, while macroeconomics looks at aggregate variables for the overall economy.

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    EC 131 Introduction

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    This document provides an introduction to microeconomic analysis and price determination. It discusses key microeconomic concepts such as scarcity, opportunity cost, the production possibilities frontier (PPF), and the assumptions of the PPF. The document explains that microeconomics is concerned with individual decision making and resource allocation, while macroeconomics looks at aggregate variables for the overall economy.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    67 views11 pages

    EC 131 Introduction: 1. Introduction To Microeconomic Analysis 2. Price Determination

    Uploaded by

    Plaxedes
    This document provides an introduction to microeconomic analysis and price determination. It discusses key microeconomic concepts such as scarcity, opportunity cost, the production possibilities frontier (PPF), and the assumptions of the PPF. The document explains that microeconomics is concerned with individual decision making and resource allocation, while macroeconomics looks at aggregate variables for the overall economy.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    EC 131 Introduction

    1. Introduction to Microeconomic
    Analysis
    2. Price Determination
    • ECONOMICS is the study of the ways that individuals
    and societies allocate their limited resources to try
    to satisfy their unlimited wants. The major task of
    economics is studying and evaluating alternatives.
    • ECONOMICS is a decision science concerned with
    the choices we make and the consequences of those
    choices for others and ourselves. In fact, the central
    forms of economics are on choice and decision-
    making.
    • Microeconomics- Is concerned with individual
    decision-making; the allocation of resources;
    and how prices, production, and the
    distribution of income are determined
    • MACROECONOMICS is the study of very large,
    economy wide aggregate variables such as
    various indicators of the levels of total
    economic activity
    • Scarcity- Scarcity refers to the
    basic economic problem, the gap between limited –
    that is, scarce – resources and theoretically limitless
    wants. This situation requires people to make
    decisions about how to allocate resources
    efficiently, in order to satisfy basic needs and as
    many additional wants as possibleHumans have
    many different types of wants and needs.
    Economics looks only at man's material wants and
    needs
    Limited resources
    • Commodities (goods and services) are
    produced by using resources.
    • Resources are often referred to as factors of
    production i.e. Land, Labour, Capital,
    • Types of commodities
    • Free good - A free good is available without
    the use of resources. There is zero opportunity
    cost, for example air.
    • An economic good is a commodity in limited
    supply.
    • The Economic Problem
    • The economic problem refers to the scarcity of
    commodities. There is only a limited amount
    of resources available to produce the
    unlimited amount of goods and services we
    desire.
    • Society has to decide which commodities to
    make
    • Opportunity Cost
    • The opportunity cost principle states the cost of
    one good in terms of the next best alternative.
    For example, a gardener may decide to grow
    carrots. The opportunity cost of his carrot
    harvest is the alternative crop that might have
    been grown instead (e.g. potatoes).
    • the loss of other alternatives when one
    alternative is chosen.
    • The PPF
    • Society as a whole must make choices about
    the commodities it produces and consumes.
    We represent this limitation on what the
    economy can produce by a simple device
    called the production possibilities frontier. A
    production possibilities frontier is one of the
    simplest models of an economy.
    • Assumptions of the PPF
    • A). The factors of production (land, labor, capital and
    entrepreneurship) are fixed in total supply. However,
    these resources can be allocated among different types
    of production.
    • b) Technology is constant
    • c) The economy operates efficiently, and all resources
    are fully employed.
    • d) Only two goods (products) are produced, that is,
    food and clothing in our
    • The PPF for an economy illustrates the numerous
    combinations of food and clothing that can be
    produced
    • PP SCHEDULE FOR A HYPOTHETICAL ECONOMY
    • Production Possibility Food (Tons/Day) Clothing
    (Garments/Day) A 1000 0 B 750 125 C 500 250 D
    250 375 E 0 500
    • PPF SHAPE
    • Technological improvements

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