Introduction to

Microeconomics
By Albert Hasudungan
 Pokok Bahasan Besar Pengantar Mikroekonomi

• Dasar-dasar teori permintaan dan penawaran

• Teori konsumen
• Teori produsen
• Struktur pasar dan permasalahannya
 Struktur Pengajaran
• Presentasi oleh dosen (ceramah)
• Pembahasan kasus dan diskusi
• Observasi dan penugasan
• Presentasi kelompok
• Tanya jawab individu
• PPT diberikan sesudah kuliah
 Assessment
1. Komponen dan proporsi penilaian

I. Teaching Assignment 30%

a. Individual Assignment 10% (Sistem Poin)
b. Group Assignment 10%
c. Quiz 10%

II. UTS (Ujian Tertulis) 35%

III. UAS (Ujian Tertulis) 35%

TOTAL 100%
 10 Principles of Economics
• What kinds of questions does economics address?
• What are the principles of how people make decisions?
• What are the principles of how people interact?
• What are the principles of how the economy as a whole works?
 Ten Principles of Economics
• Resources are scarce
• Scarcity: the limited nature of society’s resources
Society has limited resources
• Cannot produce all the goods and services people wish to have
• Economics
– The study of how society manages its scarce resources

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 Ten Principles of Economics
• Economists study:
– How people decide what to buy,
how much to work, save, and spend
– How firms decide how much to produce,
how many workers to hire
– How society decides how to divide its resources between
national defense, consumer goods, protecting the
environment, and other needs

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 How People Make Decisions

Principle 1: People face trade-offs

Principle 2: The cost of something is what you give up to
get it
Principle 3: Rational people think at the margin
Principle 4: People respond to incentives

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 Principle 1: People Face Trade-offs
• To get something that we like, we have to give up something
else that we also like
– Going to a party the night before an exam
• Less time for studying
– Having more money to buy stuff
• Working longer hours, less time for leisure
– Protecting the environment
• Resources could be used to produce consumer goods

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 Principle 1: People Face Trade-offs
• Society faces trade-offs:
– The more it spends on national defense (guns) to protect
its shores
• The less it can spend on consumer goods (butter) to raise the
standard of living at home
– Pollution regulations: cleaner environment and improved
health
• But at the cost of reducing the incomes of the firms’ owners,
workers, and customers

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 Principle 1: People Face Trade-offs
• Efficiency: society gets the most from its scarce resources
• Equality: prosperity is distributed uniformly among society’s
members
• Tradeoff:
– To achieve greater equality, could redistribute income
from wealthy to poor
– But this reduces incentive to work and produce, shrinks
the size of economic “pie”

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 Principle 2: The Cost of Something Is
What You Give Up to Get It
• Making decisions:
– Compare costs with benefits of alternatives
– Need to include opportunity costs
• Opportunity cost
– Whatever must be given up to obtain some item

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 Principle 2: The Cost of Something Is
What You Give Up to Get It
• The opportunity cost of:
– Going to college for a year
• Tuition, books, and fees
• PLUS foregone wages
– Going to the movies
• The price of the movie ticket
• PLUS the value of the time you spend in the theater

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 Principle 3: Rational People Think at the
Margin
• Rational people
– Systematically and purposefully do the best they can to
achieve their objectives
– Given the available opportunities
– Make decisions by evaluating costs and benefits of
marginal changes
• Small incremental adjustments to a plan of action

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 Principle 3: Rational People Think at the
Margin
• Examples:
– Cell phone users with unlimited minutes (the minutes are
free at the margin)
• Are often prone to making long/frivolous calls
• Marginal benefit of the call > 0
– A manager considers whether to increase output
• Compares the cost of the needed labor and materials to the
extra revenue

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 Principle 4: People Respond to Incentives

• Incentive
– Something that induces a person to act
• Examples:
– When gas prices rise, consumers buy more hybrid cars
and fewer gas guzzling SUVs
– When cigarette taxes increase,
teen smoking falls

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 How People Interact

Principle 5: Trade can make everyone better off

Principle 6: Markets are usually a good way to organize
economic activity
Principle 7: Governments can sometimes improve market
outcomes

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 Principle 5: Trade Can Make Everyone
Better Off
• People benefit from trade:
– People can buy a greater variety of goods and services at
lower cost
• Countries benefit from trade and specialization
– Get a better price abroad for goods they produce
– Buy other goods more cheaply from abroad than could be
produced at home

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 Principle 6: Markets Are Usually a Good
Way to Organize Economic Activity
• Market
– A group of buyers and sellers (need not be in a single
location)
• “Organize economic activity” means determining
– What goods and services to produce
– How much of each to produce
– Who produced and consumed these

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 Principle 7: Governments Can Sometimes
Improve Market Outcomes
• Government - enforce property rights
– Enforce rules and maintain institutions that are key to a
market economy
• People are less inclined to work, produce, invest, or purchase if
large risk of their property being stolen

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 Principle 7: Governments Can Sometimes
Improve Market Outcomes
• Government - promote efficiency
– Avoid market failures: market left on its own fails to
allocate resources efficiently
– Externality – source of market failure
• Production or consumption of a good affects bystanders (e.g.,
pollution)
– Market power – source of market failure
• A single buyer or seller has substantial influence on market
price (e.g., monopoly)

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 How the economy as a whole works

Principle 8: A country’s standard of living depends on its

ability to produce goods and services
Principle 9: Prices rise when the government prints too
much money
Principle 10: Society faces a short-run trade-off between
inflation and unemployment

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 Principle 8: Country’s Standard of Living Depends
on Its Ability to Produce Goods and Services
• Huge variation in living standards
– Across countries and over time
– Average income in rich countries
• Is more than ten times average income in poor countries
– The U.S. standard of living today
• Is about eight times larger than 100 years ago

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 Principle 8: Country’s Standard of Living Depends
on Its Ability to Produce Goods and Services
• Productivity: most important determinant of living
standards
– Quantity of goods and services produced from each unit of
labor input
– Depends on the equipment, skills, and technology
available to workers
• Other factors (e.g., labor unions, competition from abroad) have
far less impact on living standards

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 Principle 9: Prices Rise When the
Government Prints Too Much Money
• Inflation
– An increase in the overall level of prices in the economy
• In the long run
– Inflation is almost always caused by excessive growth in
the quantity of money, which causes the value of money to
fall
– The faster the government creates money,
the greater the inflation rate

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 Principle 10: Society Faces a Short-run Trade-
off between Inflation and Unemployment
• Short-run trade-off between unemployment and inflation
– Over a period of a year or two, many economic policies
push inflation and unemployment in opposite directions
– Other factors can make this tradeoff more or less
favorable, but the tradeoff is always present

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