Microeconomics,
Fourth Edition.
2
Chapter 0
3
The source of all economic problems is scarcity.
4
Problem of trade-off, and choice.
Economics, as a way of thinking, as a dismal science.
Problems - solutions - hidden consequences.
5
Main decision-making agents:
1 individuals (household),
2 firms, and 3 governments.
6
Objects of economic choice are
Pareto efficiency:
A concept to evaluate different ways of allocating
resources.
A Pareto improvement is a change to make some people better off without hurting anybody else.
commodities,
including
goods and services.
7
Main economic activities:
Consumption, Production, and Exchange.
8
Microeconomics and macroeconomics:
to show the market mechanism (the invisible hand),
Positive
issues
and
normative issues.
11
Marginal analysis
Relations between Total magnitudes, Average magnitudes,
and Marginal magnitudes.
12
1, MM is the slope of the TM
curve;
2, AM is the slope of the ray from
the origin to the poTinMt at the TM
curve;
MM(x*)
AM(x*)
x*
x
13
3, TM increasing (decreasing) if and only if
MM > 0 ( MM < 0 );
to supplement it.
9
The circular flow of economic activities.
product market
factor market
10
The product market and the factor market.
The market relation is mutual and voluntary.
The reservation price:
One’s maximum willingness to pay for something.
20
From people's reservation prices to the demand curve.
Fig.
Similarly, the supply curve. 21
(some factors are unchanged)
and in the long run.
24
Chapter 2
25
* Vector variables and vector functions. * The inner product of two vectors. * With the price vectorp = ( p1, …, pn ),
MM cuts AM at the latter’s maximum or minimum.
15
Chapter 1
16
Economics proceeds by developing Models of social phenomena.
By a model we mean a simplified representation of reality.
4, If TM is at maximum or minimum, then MM = 0;
14
5, AM increasing (decreasing) if and only if
MM > AM ( MM < AM );
6, If AM is at maximum or minimum,
then MM = AM, or
22
An economic situation is
Pareto efficient
or
Pareto optimal
if there is already no way to make any more Pareto improvement.
23
Short run and long run
Equilibria in the short run
People try to choose what’s st for them.
The equilibrium pPrriincecsipaldej:ust until
demand and supply are equal.
19
The demand curve:
A curve that relates the quantity demanded to price.
MICROECONOMICS Classroom Lecture Notes
(3 credits, as of 2004)
1
based on Hal R. Varian’s
Intermediate Microeconomics,
Sixth Edition,
referring to Pindyck and Rubinfeld’s
17
Exogenous variables:
taken as determined by factors not discussed in a model.
Endogenous variables:
determined by forces described in the model.
18
The optimization principle: