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Overview: Themes, Types of Markets, Economic Measurement, Economic Analysis
Overview: Themes, Types of Markets, Economic Measurement, Economic Analysis
Chia-Hui Chen
September 5, 2007
Lecture 1
Outline
1. Chap 1: Optimization and Allocation
2. Chap 1: Denition and Various Type of Markets
3. Chap 1: Economic Measurement
4. Chap 1: Economic Analysis
Market. A place where buyers and sellers come together to exchange some
product or good.
Buyers
individuals
rms
Sellers
rms
individuals
Cite as: Chia-Hui Chen, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT
OpenCourseWare (http://ocw.mit.edu), Massachusetts Institute of Technology. Downloaded on [DD Month
YYYY].
3 Economic Measurement
In a factor market, buyers are rms who need to hire workers and borrow
money for capital expenditure, and sellers are individuals who provide labor
and save money in banks.
Competitive
Monopolistic
Oligopoly
Monopoly
Monopsony
Oligopsony
Products
homogeneous
heterogeneous
Sellers
many
many
a few
one
many
many
Buyers
many
many
many
many
one
a few
Economic Measurement
Prices
Nominal price. The absolute or current dollar price of a good or service when
it is sold.
Real price. The price relative to an aggregate measure of prices or constant
dollar price. It also measures prices relative to others. Price after adjust
ment for ination.
Cite as: Chia-Hui Chen, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT
OpenCourseWare (http://ocw.mit.edu), Massachusetts Institute of Technology. Downloaded on [DD Month
YYYY].
4 Economic Analysis
or
Real price =
Nominal Price
2,530
12,018
18,273
CPI
38.8
130.7
181.0
Economic Analysis
Positive analysis. Study the relationship of cause and eect (Questions that
deal with explanation and prediction).
Normative analysis. Analysis examining questions of what ought to be (Of
ten supplemented by value judgments).
Cite as: Chia-Hui Chen, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT
OpenCourseWare (http://ocw.mit.edu), Massachusetts Institute of Technology. Downloaded on [DD Month
YYYY].