Chapter 1

Introduction to Microeconomics

Microeconomics F-106

Submitted To
Lubna Rahman Lecturer Department of Finance University of Dhaka

Chapter 1

Introduction to Microeconomics

Date: --------To Ms. Lubna Rahman Lecturer Department of finance University of Dhaka Subject: Submission report on Introduction to Microeconomics Dear Madam, We are pleased to submit the report you have assigned to us. The report paper was to prepare the term paper on the course named Microeconomics course code: F106, as a part of our academic activities. Working on this report was a great opportunity for us to apply our theoretical expertise, sharpen our view and ideas. Preparing this report we can know the main theme of the microeconomics. We can know the fundamental part of microeconomics. Finally, we are very thankful to you for giving us an effective topic to prepare our report and we are waiting eagerly for any kind of question you may have concerning our report.

Sincerely yours On Behalf of our Group . Khaleda Aziz

Chapter 1

Introduction to Microeconomics

This is high time we conveyed our deepest gratitude and sincere submission to the Almighty ALLAH for giving us the opportunity to accomplish such an enjoyable task of preparing this report in time.

We express our thanks to our dear course teacher Lubna Rahman for assigning us a report dealing with the fundamental or introduction of microeconomics. In this regard, we would also like to thank ourselves for our good teamwork and successful team spirit. Without co-operation and the support from each other, it would not be possible to prepare a resourceful report.

In this report we will discuss the fundamental part of microeconomics. Here we will discuss some problem and review question on chapter: 1. These questions are on why we study microeconomics, its application on practical life etc.

The presentation of this formal study paper is of a great expectation in our BBA program and we are quite happy to submit it duly applying that we think should have to be included. Theoretical knowledge should be valued when it is successfully applied in practical decision-making scenario. In this respect we found this report a great opportunity to deal with some progressive methods.

Chapter 1

Introduction to Microeconomics

Chapter 1

Introduction to Microeconomics

C o n t e n t s

TOPICS
Acknowledgement Executive Summary Introduction: Conclusion

PAGES

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Introduction to Microeconomics

Origin:

Purposes: Objective: Scope of the report: Methodology: Limitations:

Chapter 1

Introduction to Microeconomics

Goods & Services

Consumpti on Expenditur e

Goods & services

Revenue

Household s

Busines s Firms

Income

Expense

Economic Resource

Economic Resource

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Introduction to Microeconomics

9. In microeconomics theory, we seek to predict and explain the economic behavior of individual consumers, resource owners and business firms and the operation of individual markets. For this purpose we use models. A model abstracts from the many details surroundings an event and identifies a few of the most important determinants of the event. a) If two models predict equally well but one is more complicated than the other, I will use the easier one. A model usually results from casual observation of the real world. A model is not tested by its realism of its assumption but rather by its ability to predict accurately and explain any economic behavior. When these qualities are included then it is called a good model. Complicated model means, which model explain and predict in a complex or complicated way. Though two models results equally good, so I will use easier one because it is comparatively easy to explain and predict any economic behavior. b) We know to test a model is not only by its ability to predict accurately, but also by whether the prediction follows logically from the assumptions and the internal consistency of those assumptions. That model is complicated which is complex or complicated to predict accurately and to explain. By this we can identify which is more complex from two models. 11. Sometimes economists often disagree on economic matters. So economic is not a science. This statement is absolutely correct. Science is a special knowledge of any subject. Science explains any matter with a theory that can predict correctly in any situation or assumption. Science can explain a matter with mathematical explanation. On the other hand, economics predict and explain the economic behavior. Its models are resulted from casual observation of the real world. The theory of economics is based on real world survey, so economic matters can be varied on different situation or assumption. So we can say that economic is not a science.

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Introduction to Microeconomics

12. a) The positive income aspects of positive analysis refer to such things as the shift in the kinds and quantities of goods and services produced and their effect on employment and incentives to work, on economics growth and so on. All of these can be objectively measured or estimated. b) The normative aspects of income redistribution refer to the value-based disagreement on how much income should be redistributed.

Problem Question:1 Why do we study microeconomics ? Answer: Economics deals with the allocation of scare resources among alternative uses to satisfy human wants. So it is very easy to find out why we study microeconomics. the reasons are given bellows1.

scarcity of resources and commodities is the fundamental economic fact of every society. We can learn about scarcity and its proper allocation by studying microeconomics.

2. All society must decide what to produce, how to produce and for whom to produce and how to ration a given amount of a commodity over time. It is the price system that performs these functions for the most part. 3. Micro economics tells us How to maximize our wealth. 4. We an take our export and import decision easily by studyiond Microeconomics. Question:2. Answer: one of the most serious concerns of individuals, businesses and governments in the United States and in

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Introduction to Microeconomics

most other countries today is the explosion of the heath care costs. More than 13% of national income was spent for heath care in 2000 in the United States, up from 4% in 1940 and 7% in 1970. Health care costs have thus risen faster than income and now exceed $4600 per person living in the United States. There is off course nothing wrong with spending more on health care if that is what society wants. But a higher proportion of income spent on health care means that proportionately less is available for all other goods and services. But it is not only reason for reduction in the quantity of all other goods and services that can be purchased over time. So an increasing proportion of income spent on health care does not necessarily involve a reduction in the quantity of all other goods and services that can be purchased over time. Our recourses are limited, so if health care costs exploding the problem of scarcity easily arise.Because if we use a large portion of our limited resource in heath care sector we can not provide resources in the other sectors simultaneously. In this case the scarcity will arise.

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Introduction to Microeconomics

Conclusion

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