These notes are prepared for the Microeconomic courses I teach at the Clearly, the notes are far from being complete and cannot compensate for reading. Notes on Microeconomic Theory ver: Aug. 3 The Traditional Approach to Consumer Theory. Basics of Preference Relations. MICROECONOMICS NOTES (EC). Department of Economics. Midlands State University. LEVEL: FIRST SEMESTER OF FIRST LEVEL.

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in modern economics in general and in the lecture notes in particular. Rubinstein Ariel, Lecture Notes in Microeconomics (modeling the economic agent). The lecture notes are from one of the Discussion sections for the course. D2, The basics of supply and demand (PDF), Demand and supply curves (chapter 2). š¯—£š¯——š¯—™ | Economics class sizes are shrinking at most universities, and at some at the desk apparently minding my own business, reading and making notes.

Microeconomics What determines how households and individuals spend their budgets? What combination of goods and services will best fit their needs and wants, given the budget they have to spend? How do people decide whether to work, and if so, whether to work full time or part time?

How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means? What determines the products, and how many of each, a firm will produce and sell? What determines what prices a firm will charge? What determines how a firm will produce its products? What determines how many workers it will hire? How will a firm finance its business? When will a firm decide to expand, downsize, or even close?

In the microeconomic part of this book, we will learn about the theory of consumer behavior and the theory of the firm. Macroeconomics What determines the level of economic activity in a society? In other words, what determines how many goods and services a nation actually produces? What determines how many jobs are available in an economy? What causes the economy to speed up or slow down? What causes firms to hire more workers or to lay workers off?

Finally, what causes the economy to grow over the long term?

How can macroeconomic policy be used to pursue these goals? Mainstream economics does not assume a priori that markets are preferable to other forms of social organization. In fact, much analysis is devoted to cases where market failures lead to resource allocation that is suboptimal and creates deadweight loss.

A classic example of suboptimal resource allocation is that of a public good. In such cases, economists may attempt to find policies that avoid waste, either directly by government control, indirectly by regulation that induces market participants to act in a manner consistent with optimal welfare, or by creating " missing markets " to enable efficient trading where none had previously existed.

This is studied in the field of collective action and public choice theory.

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This can diverge from the Utilitarian goal of maximizing utility because it does not consider the distribution of goods between people. Market failure in positive economics microeconomics is limited in implications without mixing the belief of the economist and their theory.

The demand for various commodities by individuals is generally thought of as the outcome of a utility-maximizing process, with each individual trying to maximize their own utility under a budget constraint and a given consumption set. Basic microeconomic concepts[ edit ] The study of microeconomics involves several "key" areas: Demand, supply, and equilibrium[ edit ] Main article: Supply and demand Supply and demand is an economic model of price determination in a perfectly competitive market.

It concludes that in a perfectly competitive market with no externalities , per unit taxes , or price controls , the unit price for a particular good is the price at which the quantity demanded by consumers equals the quantity supplied by producers. This price results in a stable economic equilibrium. Measurement of elasticities[ edit ] Main article: Elasticity economics Elasticity is the measurement of how responsive an economic variable is to a change in another variable.

Elasticity can be quantified as the ratio of the change in one variable to the change in another variable, when the later variable has a causal influence on the former. It is a tool for measuring the responsiveness of a variable, or of the function that determines it, to changes in causative variables in unitless ways.

Frequently used elasticities include price elasticity of demand , price elasticity of supply , income elasticity of demand , elasticity of substitution or constant elasticity of substitution between factors of production and elasticity of intertemporal substitution. Consumer demand theory[ edit ] Main article: Consumer choice Consumer demand theory relates preferences for the consumption of both goods and services to the consumption expenditures; ultimately, this relationship between preferences and consumption expenditures is used to relate preferences to consumer demand curves.

The link between personal preferences, consumption and the demand curve is one of the most closely studied relations in economics.

It is a way of analyzing how consumers may achieve equilibrium between preferences and expenditures by maximizing utility subject to consumer budget constraints.

Theory of production[ edit ] Main article: Production theory Production theory is the study of production, or the economic process of converting inputs into outputs. So that it optimizes the gains.

Samuelson however argues that the resources are not static and they can be made to grow over time through exploration, exploitation and development. According to Samuelson the growth of resources is necessary since not only the present wants of human beings should be considered but also the increasing wants of increasing number of people should be taken in to consideration. Like Robbins Samuelson includes all activities in economics whether they can be measured in terms of money or not or whether they lead to material welfare or not.

Best General Definition of Economics: Economics as a science: Economics is a science because it uses scientific methods in its researches and investigations. As every science economics also has a unit of measurement that is money; the economist can measure the individual and business motives with the use of this measuring rod of money. Though the economics has an inability to predict the future course of events as accurately as accurately as the laws of the physical sciences like physics and chemistry can.

But for this reason the scientific nature of economics can not be denied. The reason for this lack of accuracy is that economics deals with highly complex and variable forces. It deals with men who have freedom of will and there is no guarantee that they will act in a preconceived manner.

Economics as an art: Economics is an art too. Economics as a science make laws, rules and doctrines and as an art it tell how to use these laws rules and doctrines for the maximum satisfaction of human beings. Economics- Positive Science or Normative Science The old English Classical School of Economics held that Economics was purely a positive science while the Historical School of Germany held the contrary view that the economics is a normative science.

Economics as a positive science: Economics as a positive science is concerned with the criteria of, what is? And not to the criteria of what ought to be? Economics must study things as they are.

A Level Economics Year 1 Microeconomics Study Notes

Economics must be neutral between ends. Economics does not discuss the moral rightness or wrongness of the thing. An economist should not give value judgments or ethical advices. Economics as a normative science: Economics as a normative science is concerned with the criteria of what ought to be?

It has no objection to discussing the moral rightness or wrongness of the thing. An economist is also a human and lives in the same society and knows that the rules framed by him are used for this society so he can not abstain himself from giving value judgments. Methods of Economic Study Since Economics is a science, it also adopts certain methods for the discovery and formulation of its laws and principles.

There are two methods 1. Deductive Method: This method descends from general to particular. Under deductive method conclusions are drawn on the basis of certain fundamental truths. Law of demand and law of supply are based on deduction.

Steps or stages of Deduction: Perception of problem. Making assumptions. Formulating hypothesis.

Testing or verifying the hypothesis. Inductive Method: This method mounts from particular to general. Induction is a process in which facts are collected, arranged and then general conclusions are drawn. Steps or stages of Induction: Perception of the problem. Collection, classification and analysis of data using appropriate statistical technique. Finding out the reason of relationship existing.

Setting up rules and general laws. Microeconomics and Macroeconomics. These terms were first used by Prof. Ragnar Frisch of Oslo University. Micro Economics: Microeconomics may be defined as that branch of economic analysis which studies the economic behavior of the individual unit, may be a person, a particular household, or a particular firm.

It is a study of one particular unit rather than all the units combined together. In microeconomics we examine the trees not the forest. Since microeconomics splits up the entire economy into smaller parts for the purpose of intensive study, it is sometimes referred to as the Slicing Method.

Scope of Microeconomics: Theory of product with its two constituents, namely, the theory of consumers behavior and the theory of production and costs. Theory of factor pricing with its four constituent, namely, the theories of wages, rent, interest and profit. Theory of Economic Welfare. Microeconomics is sometimes referred to as Price Theory, the reason being that prices are the main part of microeconomics.

Macro Economics: Macroeconomics may be defined as that branch of economic analysis which studies the behavior of not one particular unit, but of all the units combined together.

Macroeconomics is the study of aggregates; hence, it is also called Aggregative Economics.

Microeconomics: download study notes, summaries, exam preparation tests

It is the study of the overall conditions of an economy, say, total production, total consumption, total savings, and total investment. Theory of Income, Output and Employment with its two constituents, namely, the theory of consumption function and the theory of investment function.Efficiency in exchange, equity and efficiency, and efficiency in production PDF.

That ground can be divided into two parts: Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses; Macroeconomics looks at the economy as a whole.

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Pooja Jain. This leads to exploitation of labour by capitalists during the industrial revolution in England. This method mounts from particular to general.

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