Scribd
Upload
201 views21 pages

Chapter 1

This document provides an introduction to microeconomics. It defines microeconomics as the study of how individual economic units like households, firms, and governments make decisions and how scarce resources are allocated. It compares microeconomics, which looks at small economic units, to macroeconomics, which looks at aggregate measures for the whole economy. It then discusses three main economic problems - the problems of scarcity, choice, and opportunity cost. It introduces the production possibilities curve to illustrate scarcity and opportunity costs graphically and outlines factors that can shift the curve. Finally, it discusses how different economic systems approach solving the basic economic problems of what, how much, and how to produce goods and for whom.

Uploaded by

tiffada86
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
201 views21 pages

Chapter 1

This document provides an introduction to microeconomics. It defines microeconomics as the study of how individual economic units like households, firms, and governments make decisions and how scarce resources are allocated. It compares microeconomics, which looks at small economic units, to macroeconomics, which looks at aggregate measures for the whole economy. It then discusses three main economic problems - the problems of scarcity, choice, and opportunity cost. It introduces the production possibilities curve to illustrate scarcity and opportunity costs graphically and outlines factors that can shift the curve. Finally, it discusses how different economic systems approach solving the basic economic problems of what, how much, and how to produce goods and for whom.

Uploaded by

tiffada86
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 21

CHAPTER 1: INTRODUCTION TO MICROECONOMIC

1.1 UNDERSTAND MICROECONOMIC


 1.1.1

Definition Of Microeconomics  1.1.2 Comparison between of Micro and Macro Economy: one who manages a household Economics:  study of how society manages its scarce resources  study of how people use their limited resources to fulfill unlimited wants.

Definition Of Microecomics
 Studies

individual economic units consists of household, firm and government.  micro means looking for small units that provides outlines for choices and decision making of individual, a business and public at large.

Comparison between of Microeconomic and Macroeconomic


 Macro

means studies the aggregate behaviour of entire economy  Study the gross domestic product (GDP), national income (NI), inflation, deflation, unemployment, public finance, international trade and others.  Means large units that cover all the economy system

1.2 ECONOMIC PROBLEMS


 1.2.1

THREE(3) OF ECONOMIC PROBLEMS  1.2.2 CONCEPT OF ECONOMIC PROBLEMS  1.2.3 PRODUCTION POSSIBILITY CURVE (PPC)

BASIC ECONOMIC CONCEPTS


Unlimited human wants refer to ends when we need to choose between the most urgent need and the less urgent since we have a limited resources to fulfill unlimited wants.  Scarce refer to the wants which are unlimited although the means to satisfy these wants are limited.  Choice where there is scarcity , choices have to be made.  Opportunity cost refer to second best alternatives that has to be go forgone for another choice which gives more satisfaction.

ECONOMIC PROBLEMS


 

Problems of Scarcity Individual have problems of scarcity of time for recreation, study and entertainment as well as scarcity of money to pay for fees and to purchase food,drinks and clothes. Firms face the problems of scarcity of capital caused by limited economic resources. Government faces problems of scarcity of financial resources and revenue to build basic amenities for society such as schools, clinics and roads.


of Choice  Man has to make choice between desired goods and services.  Consumers needs to make choices in order to maximize satisfaction, while producers need to make choices in order to maximize profits.  Governments need to make choices based on priorties fulfill the wants of society.  Firms make choices based on goals to maximize profits.
 Problems

of Opportunity Cost  Refer to the second best option that will have to be forgone in order to select the best option. Arise from limited factors of production.
 Problems

BASIC ECONOMIC PROBLEMS


 Key

words:  WHAT TO PRODUCE?  HOW MUCH TO PRODUCE?  HOW SHOULD PRODUCED?  FOR WHOM TO PRODUCED?

PRODUCTION POSSIBLITIES CURVE (PPC)


 Various

possible combination of goods and services produced within a specified time with given technology and resources.  There have three(3) assumptions of PPC:  1) economy is operating in full efficiency  2) amount of resources available is fixed  3) state of technology doest not change throughout production.

Table 1.1 ppc


Combination s A B C D E F Machine 15 14 12 9 5 0 Butter 0 1 2 3 4 5

Figures 1.1 ppc

FACTORS THAT INFLUENCE THE SHIFT OF PPC


 Economy

Growth  Improvement in technology  Population

SOLVING BASIC ECONOMIC PROBLEMS




    

Institutions or relevant bodies must make decision about how limited economic resources are utilized to fulfill society s unlimited demands. The solution to each problem is different for each economic system. There have Four(4)economy system: A) free market economy B) centrally planned economy C) mixed economy D) islamic economy

Free Market Economy


 An

economic system that does not involve government intervention in economic activities  All economic decisions determined by the price mechanism  Economics resources are solely owned by private parties and are freely utilized by individuals. Individuals and producers have freedom of choice

Centrally Planned Economy


 An

economic system that involves direct governmnet intervention in the planning and control of economic activities  Economic decisions are made by the government  Consumers and producers do not have freedom of choice  Social welfare is prioritized , resulting in the production of more social goods

Mixed Economy
 An

economic system where the private sector and the government will make economic decisions together.  The government will intervene if there is any weakness in the price mechanism

Islamic Economy
 Prioritized

a peaceful Islamic community in every aspect of economic activities  Individuals are free to accumulate wealth, in accordance with Islamic principles and commandments

Tutorial Questions:
1. Describe the economic problems: what, how much, how to be produced and to whom the product should be produced? a) free market b) central planned c) mixed economic d) Islamic economic

2. Explain four(4) factors of production in an economy 3. Define a production possibilities curve and the assumptions used to explain the production possibilities curve 4. Discuss the four(4)basic economic problems We will discuss all the questions on next class. Good luck

You might also like