Professional Documents
Culture Documents
Economics: Microeconomics Macroeconomics
Economics: Microeconomics Macroeconomics
MICROECONOMICS MACROECONOMICS
• Basic Economic concepts • National Income accounting
• Suply, Demand and Market • Inflation and Unemployment
• Suply, Demand & Government • Financial, Monetary and
Policies Banking system
• International trade • Macroeconomics Policies
• Elasticity
• Production and Cost
• Market structures
1
MICROECONOMICS
2
Factors of productions
Resource inputs used to produce goods and
services.
• Land
• Labor
• Capital
• Entrepreneurship.
Principles of Economics
• Scarcity: 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
• How People Make Decisions
• How People Interact
• How the economy as a whole works
3
How people make decision
• People face trade-offs among alternative goals
• The cost of any action is measured in terms of forgone
opportunities
• Rational people make decisions by comparing
marginal costs and marginal benefits
• People change their behavior in response to the
incentives they face
4
The Different Kinds of Goods
5
Ten Principles of Economics
1-11
6
The opportunity cost of making a specific choice is:
a. useful primarily as an indicator of relative prices.
b. Its nominal costs in terms of all other goods.
c. the information that guides your decision.
d. measured by the subjective value of the best alternative you sacrifice.
Marrying the one you love involves opportunity costs, primarily because:
a. being married restricts your freedom to marry someone else, and you must
also consider making someone else happy when making decisions that affect
both of you.
b. two can live as cheaply as one.
c. having children is unavoidable and reduces the time you could work for pay.
d. income taxes on single people are heavier than on married couples.c
7
Circular-flow diagram
Households:
Own the factors of production,
sell/rent them to firms for income
Buy and consume goods & services
Firms Households
Firms:
Buy/hire factors of production,
use them to produce goods and services
Sell goods & services
Circular-flow diagram
Revenue Spending
Markets for
G&S Goods &
G&S
sold Services bought
Firms Households
8
Market Interactions
Foreign market
Product
participants markets
Factor
Foreign market markets
participants
In a circular-flow diagram,
a. taxes flow from households to firms, and transfer payments flow from firms
to households.
b. income payments flow from firms to households, and sales revenue flows
from households to firms.
c. resources flow from firms to households, and goods and services flow from
households to firms.
d. inputs and outputs flow in the same direction as the flow of dollars, from
firms to households.
9
Production possibilities frontier
10
Production possibilities frontier Point on
Production
graph Com-
Wheat
Moving along a PPF puters
Involves shifting Wheat A 500 0
(tons)
resources from the B 400 1,000
production of one good 6,000
E C 250 2,500
to the other 5,000
Society faces a tradeoff 4,000 D D 100 4,000
Getting more of one 3,000 E 0 5,000
C
good requires sacrificing
2,000
some of the other B
1,000
The slope of the PPF A
The opportunity cost of 0
0 100 200 300 400 500 600
one good in terms of
the other Computers
11
The production possibilities frontier demonstrates the basic economic principle
that:
a. economies are always efficient.
b. assuming full employment, to produce more of any one thing, the economy must
produce less of at least one other good.
c. assuming full employment, an economy is efficient only when the production of
capital goods in a particular year is greater than the production of consumption
goods in that year.
d. assuming full employment, supply will always determine demand.
12
Which of the following questions would NOT be of particular interest to a
microeconomist?
a. Why do national economies grow?
b. What percentage of consumer income is spent on entertainment?
c. Why do workers prefer the 4-day workweek?
d. What happens to worker productivity when a business shifts to a 4-day
workweek?
The relationship between microeconomics and macroeconomics is analogous to
the relationship between
a. the behavior of a single baseball player and the collective behavior of the entire
team out on the baseball field.
b. the behavior of a single race car driver and the collective behavior of all cars racing
on a race track.
c. the behavior of one football player and the collective behavior of the entire football
team out on the field.
d. all of the above
13
“An increase in interest rates will lower economic growth.” This
statement is
a. a positive economic statement.
b. a normative economic statement.
c. untrue in every case.
d. controversial, and so not a valid economic issue.
14