Microeconomics

• Microeconimcs 


  The study of individual & market decisions and activity.
• Scarcity 


  A situation arises when people have unlimited wants in the face of limited resources
• Opportunity cost

  In decision making, the value of the next-best alternative forgone
• Marginal analysis 


  An approach to economic decision making based on considering the additional (marginal) benefits and costs of a change in behaviour.
• Name three economic agents

  -households

  -government

  -firms
• What economic decisions do households make?

  Consumption, saving, investment.
• What economic decisions do firms make?

  Production, pricing, investment, financing.
• What economic decisions does the government make?


  Fiscal policy, monetary policy, regulation.
• What does BEP stand for

  Basic economic problem
• Infinite

  Unlimited
• Finite

  Limited
• What do economists assume about human wants ?

  Economists assume that human wants are infinite
• Factors of production/resources

  -Land (natural)

  -Enterprise (risk taking)

  -Capital (man-made)

  -Labour (man-made)
• What motivates entrepreneur?

  Profit
• Economic scarcity

  A situation that arises when people have unlimited wants in the face of limited resources (supply is limited in the relation to demand)
• Infinite human wants drives progress economically but it could also cause greed and depletion of resources
• Renewable resource - solar

  Non-renewable- crude oil, iron ore
• Economic scarcity leads to economic choices
• Decision Makers use cost benefit analysis
• Traditional economists assumes that all economic decision makers are rational, maximisers.
• Another word for an economist decision maker

  An agent
• PPF model 


  A model for economic choice
• Assumptions of models

  ▪ Limited factors of

  production (resources)✅good assumption

  ▪ All resources are perfect

  substitutes for each other❌limiting assumption- for simplicity

  ▪ Only 2 choices – Good A

  or Good B❗️wide application
• What does the frontier show

  The maximum output that we could produce - with limited resources
• Improving PPF

  • relax Ceteris paribus- assume that factors are not perfect substitutes - resulting in a curved PPF which is concave to the origin
• All along the PPF - we see productive efficiency