1/11/2017

Microeconomics 141
3 Credit Hours

Course Outlines

1
 1/11/2017

Course Outlines

Course Evaluation

Class Parti: 5%
Assignments: 5%
Quizzes: 15%
Mid-term: 35%
Final: 40%
Total: 100%

2
 1/11/2017

Recommended Books
Any Undergraduate book of Microeconomics
written by a foreigner author
My lectures will be based on the first book in the
following list
i. Principles of Microeconomics by N. Gregory Mankiw 7th Edition
(2015) (Main text book)
Advance readings:
ii. Microeconomics by Jeffery M. Perloff, 6th Edition (2011)
iii. Intermediate Microeconomics by Hal. R. Varian 7th Edition (or 8th
Edition 2009)
iv. Nicholson. S Intermediate Microeconomics and its Applications,
11th Edition (2010)

So Lets start the Work!!!!

3
 1/11/2017

Chapter 1
Ten Principle of Economics

MS-141: Microeconomics

Course Instructor: Dr. Muhammad Sabir

In this chapter,
look for the answers to these
questions:

What is Economics ? What is Microeconomics ?

What kinds of questions does economics
address?
What are the principles of how people make
decisions?
What are the principles of how people interact?
What are the principles of how the economy as a
whole works?

4
 1/11/2017

What Economics Is
All About
Word economics originates from Greek word
oikonomos, which means one who manages a
household
A household faces many decisions.. any example ?

Society also faces many decisions ..any example ?

What Economics Is All

About(ii)
Scarcity: the limited nature of societys resources
Economics: the study of how society manages its
scarce resources, e.g.
how people decide what to buy,
how much to work, save, and spend
how firms decide how much to produce,
how many workers to hire
how society decides how to divide its resources
between national defense, consumer goods,
protecting the environment, and other needs

5
 1/11/2017

What Economics Is All

About (iii)
Economist also study:
how people interact with each other ? E.g., how
the multitude of buyers and sellers of a good together
determine the price at which the good is sold and the
quantity that is sold
Economists analyse forces and trends that affect the
economy as a whole such as:
growth in average income,
the fraction of the population that cannot find work,
the rate at which prices are rising

What is Microeconomics?
The word micro means small (one millionth)

Microeconomics focuses on the behaviour of individual

markets and the smaller individual units that make up the
broader economy Businesses, consumers, investors,
and workers

In studying microeconomics we examine how individual

consumers and firms make decisions and how the actions
of all buyers and sellers determine prices and how prices
influence the decisions and actions of individual buyers
and sellers

6
 1/11/2017

The principles of
HOW PEOPLE
MAKE DECISIONS

The behaviour of an economy reflects

the behaviour of the individuals who
make up the economy, we begin our
study of economics with four principles
of individual decision making

HOW PEOPLE MAKE

DECISIONS
Principle #1: People Face Tradeoffs
All decisions involve tradeoffs. Examples:
Going to a party the night before your midterm leaves less
time for studying
Protecting the environment requires resources
that could otherwise be used to produce consumer goods
Society face tradeoff between efficiency and equality: to
achieve greater equality, could redistribute income from
wealthy to poor. But this reduces incentive to work and
produce, shrinks the size of the economic pie
Society also face trade-off between Gun and Butters

7
 1/11/2017

HOW PEOPLE MAKE

DECISIONS

Principle #2: The Cost of Something Is

What You Give Up to Get It
Making decisions requires comparing the costs
and benefits of alternative choices
The opportunity cost of any item is whatever
must be given up to obtain it
It is the relevant cost for decision making