1 / 16

Introduction to Microeconomics (L11100)

School of Economics. Introduction to Microeconomics (L11100). Section 1: Introduction. Dr. C.W. Morgan. Outline. 1.1 What is Economics? 1.2 What questions does Economics tackle? 1.3 Who are Economists & how do they answer those questions? 1.4 Markets in Brief 1.5 Summary.

ratchford
Download Presentation

Introduction to Microeconomics (L11100)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. School of Economics Introduction to Microeconomics (L11100) Section 1: Introduction Dr. C.W. Morgan

  2. Outline 1.1 What is Economics? 1.2 What questions does Economics tackle? 1.3 Who are Economists & how do they answer those questions? 1.4 Markets in Brief 1.5 Summary

  3. 1.1 What is Economics? “Economics is the study of those activities which, with or without money, involve exchange transactions among people” “Economics is the study of people in their ordinary business of life, earning and enjoying a living” “Economics is the study of wealth” “Economics is the study of how to improve society”

  4. “Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce resources that could have alternative uses to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in society. It analyses the costs and benefits of improving patterns of resource allocation” (Samuelson, Economics, 10e p 3)

  5. “Economics is the study of how people and societies deal with scarcity” (Morgan, Katz and Rosen Microeconomics p 2) Can’t satisfy allour desires thus we have to forgosome things. Economists study the choice decision and provide a value for what is forgone. OPPORTUNITY COST The cost of any activity/good in terms of the next best alternative that has been forgone

  6. Opportunity Cost: an Example You have £20 to spend and four items: • buy a textbook • get a rail ticket • save it • go for a curry and beers 3 seconds to decide!!

  7. Applications • “French literature pays price as the language of money lures students” • The Times 12th September 2007 • Students opt for education but do so on the basis of subject not simply “any old degree” • Opportunity cost of studying business or economics is literature, arts and culture – thus annoying the French hierarchy

  8. “US Acts to retain lead with GPS” Financial Times 20th September 2007 • Battle between US and EU over exploitation of satellite technology • EU’s Galileo project lacks enough funds • On 19th September 2.7bn euros switched from agriculture • Thus the opportunity cost of the new “space-race” is helping farmers across the EU

  9. 1.2 What Questions does Economics Tackle? • What to produce/consume? • How to produce/consume it? • Who benefits from production/consumption? MICRO and MACRO levels

  10. 1.3 Who are Economists and how do they answer those questions? If all Economists were laid end to end they would not reach a conclusion. George Bernard Shaw An Economist is someone who talks about things he doesn’t understand and makes you feel ignorant. Herbert Prochnow Economists spend their time arranging the deck chairs on the Titanic. Ernst Schumacher The one profession where you can gain great eminence without ever being right. George Meany Economists are people who work with numbers but don’t have the personality to be accountants. Anon.

  11. How do they tackle the questions posed? • Simplify problems via assumption • - eases handling of problem • - emphasises key points • - mimics scientific approach • Build models to develop theories • - need to ensure theories are tested • - simplified description of a problem using equations & graphs

  12. How Theories Are Developed MAKE ASSUMPTIONS MODEL DEDUCE IMPLICATIONS MODIFY ASSUMPTIONS MAKE PREDICTIONS THEORY TEST PREDICTIONS PREDICTIONS CONFLICT WITH FACTS PREDICTIONS AGREE WITH FACTS DISCARD IN FAVOUR OF SUPERIOR ALTERNATIVE THEORY ACCEPTED

  13. Always ensure objectivity POSITIVE or NORMATIVE? 1. UK inflation is higher than in the US. 2. The government is wasting its money on the NHS. 3. British workers are better than Japanese workers. 4. Per head, National Product is lower in France than it is in Kuwait. 5. The government should pay more to the unemployed. 6. UK privatisation has greatly increased the profitability of firms.

  14. 1.4 Markets in Brief If we are not in a command economy…… • How can we be sure the number of cars made equals the number that consumers want? • How do we know if the number of financiers needed by the City equals the number who want to be financiers? • How do we know we get the right number of loaves each day? Answer: the market decides

  15. The Market for Loaves Demand Price Supply P1 Pe Qd Qe Qs Quantity

  16. 1.5 Summary • Economics is the study of choice • Key principle of opportunity cost • Simplification by assumption • Positive at all times • Use markets as a basis for analysis

More Related