Lecture One: Introduction to Microeconomics
September 13, 2011
What is Economics?
Economics: the social study that studies the choices that individuals, businesses,
Definition of Economics
All economic questions arise because we want more tan we can get.
Our ability to satisfy our needs and wants is called scarcity
Because we face scarcity we are forced to make choices.
The choices we make depends on the incentives we face.
An incentive is a rewards that encourages an action or a penalty that
discourages an action.
Differences between Micro and MacroEconomics
Micro: is the study of choices that individuals and businesses make, the way
those choices interact in markets and the influence of governments
Macro: the study of the performance of the national and global markets.
Macroeconomics also deals with currency and money, whereas microeconomics
Nominal variables: variables that are expressed in terms of currency or money
Two Big Questions of Economics
How do choices end up determining what, how, and for whom good and services
When do choices made in the pursuit of self-interest also promote the social
interest? Negative externalities: when choices made in self-interest have negative
consequences on society. Us