Microeconomics Introduction.
What is economics: Economics is split into two main components.
Macroeconomics & Microeconomics:
Macroeconomics: It is the big picture stuff, economics on government level. Economics
measured at the entire nation or country level. It includes stuff like unemployment,
inflation, and GDP.
Microeconomics: It includes individual decisions. It is the small-scale stuff. This includes
decisions made as consumers or producers. It can be considered as the allocation of scarce
resources.
It is thought that Economy works better without any involvement of any authority. It is
better without a central plan. There are some exceptions where an intervention of the
authority is necessary to control the situation such as monopolies formation.
“A market economy is self-organising in the sense that when individuals act independently
to pursue their own self-interest, responding to prices set on open markets, they produce
co-ordinated and relatively efficient economic activity.”
Economy without any central plan is called Market Economy.
Economic Concepts:
1) Scarcity: Scarcity is when things aren’t available as much as the demand. There are
not plenty of the resources. In other words things (resources) are limited. We can’t
have everything we want therefore we have to either compromise or make decisions
to attain the things that are available for us. When making decisions on scarce
resources there are trade-offs.
2) Trade-off is the balance achieved between two desirable but incompatible feature.
For example, taking a day off work to go to a concert. Earning money & going to
concert are both desirable but losing a day’s wage to go see a concert which will be
held once is a trade-off. It is compromise made by the individual when they had two
desirable things to choose from which were incompatible. Another word used to
describe this situation is called Opportunity cost of capital.
3) Opportunity cost of capital: this is the cost of obtaining a unit of one product in
terms of number of units of other products that could’ve been obtained instead. In
simple terms opportunity cost of capital is when you have two or more choices and
you choose the best one out of them then the rest of the options are the cost. This
can be shown by a production possibility frontier/boundary.
4) Production Possibility frontier/boundary: this is a graphical curve which shows all the
possible combinations of goods that can be produced by an economy whose
What is economics: Economics is split into two main components.
Macroeconomics & Microeconomics:
Macroeconomics: It is the big picture stuff, economics on government level. Economics
measured at the entire nation or country level. It includes stuff like unemployment,
inflation, and GDP.
Microeconomics: It includes individual decisions. It is the small-scale stuff. This includes
decisions made as consumers or producers. It can be considered as the allocation of scarce
resources.
It is thought that Economy works better without any involvement of any authority. It is
better without a central plan. There are some exceptions where an intervention of the
authority is necessary to control the situation such as monopolies formation.
“A market economy is self-organising in the sense that when individuals act independently
to pursue their own self-interest, responding to prices set on open markets, they produce
co-ordinated and relatively efficient economic activity.”
Economy without any central plan is called Market Economy.
Economic Concepts:
1) Scarcity: Scarcity is when things aren’t available as much as the demand. There are
not plenty of the resources. In other words things (resources) are limited. We can’t
have everything we want therefore we have to either compromise or make decisions
to attain the things that are available for us. When making decisions on scarce
resources there are trade-offs.
2) Trade-off is the balance achieved between two desirable but incompatible feature.
For example, taking a day off work to go to a concert. Earning money & going to
concert are both desirable but losing a day’s wage to go see a concert which will be
held once is a trade-off. It is compromise made by the individual when they had two
desirable things to choose from which were incompatible. Another word used to
describe this situation is called Opportunity cost of capital.
3) Opportunity cost of capital: this is the cost of obtaining a unit of one product in
terms of number of units of other products that could’ve been obtained instead. In
simple terms opportunity cost of capital is when you have two or more choices and
you choose the best one out of them then the rest of the options are the cost. This
can be shown by a production possibility frontier/boundary.
4) Production Possibility frontier/boundary: this is a graphical curve which shows all the
possible combinations of goods that can be produced by an economy whose
