2_microeconomics.pptVIP

Introduction to Business and Economics Session 2: Microeconomics Overview Why should we learn economics What is microeconomics What does microeconomics consider Why Should We Learn Economics The Age of Chivalry is gone; that of sophisters, economists, and calculators has succeeded. Edmund Burke Why Should We Learn Economics We do not spontaneously learn that we don’t learn that we don’t learn. The problem lies in the structure of our minds: we don’t learn rules, just facts, and only facts. Metarules (such as the rule that we have a tendency to not learn rules) we don’t seem to be good at getting. We scorn the abstract; we scorn it with passion. The Black Swan, pg. xxi What is Microeconomics The part of economics concerned with single factors and the effects of individual decisions What is Microeconomics It considers questions such as, how is it decided, how should it be decided, what enterprises should operate; what goods and services should be produced; what techniques of production should be used What is Microeconomics At what prices should goods be sold, or on what terms should they be given away; and how should incomes be distributed amongst the members of society Oxford Dictionary of Economics What Does Microeconomics Consider Supply Demand Demand Consumer Behavior Production Business Organization Analysis of Costs The Behavior of Perfectly Competitive Markets Imperfect Competition Monopoly Uncertainty Game Theory Supply Demand Elasticity of Demand and Supply How much the quantity demanded of a good changes when its price changes Elasticity When elasticity is high, demand changes greatly according to price changes (e.g. luxury) When elasticity is low, demand does not change much (e.g. necessities like oil) Oil Price Changes Demand Consumer Behavior Why Should We Study Consumers? Consumers make most decisions in a routine and unthinking way. A key assumption is that consumers are fairly