Microeconomics 1

Introduction to Economics

1. Scarcity and Choice:

- Scarcity: The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

- Choice: Decisions made to allocate limited resources to satisfy various needs and wants.

2. Opportunity Cost:

- The cost of the next best alternative foregone when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

3. Production Possibilities Curve (PPC):

- A graphical representation showing the maximum quantity of goods and services that can be produced with limited resources.

- It illustrates concepts of trade-offs, opportunity cost, efficiency, and economic growth.

4. Microeconomics vs. Macroeconomics:

- Microeconomics: Focuses on the behavior of individual households and firms in making decisions on the allocation of limited resources.

- Macroeconomics: Deals with the performance, structure, and behavior of an economy as a whole.

5. Positive and Normative Economics:

- Positive Economics: Based on objective analysis and facts. It describes and explains various economic phenomena.

- Normative Economics: Involves value judgments about what the economy should be like or what particular policy actions should be recommended.

6. Economic Systems:

- Market Economy: Economic decisions and the pricing of goods and services are guided by the interactions of citizens and businesses.

- Command Economy: The government or central authority makes all decisions about the production and distribution of goods and services.

- Mixed Economy: Combines elements of both market and command economies, where some resources are owned and controlled by the government while others are left to the free market.

7. Factors of Production:

- Land: Natural resources used to produce goods and services.

- Labor: Human effort, both physical and mental, used to produce goods and services.

- Capital: Man-made resources (e.g., machinery, buildings) used in production.

- Entrepreneurship: The ability to combine land, labor, and capital to create and market new goods and services.

8. Economic Development:

- Focuses on improvingpeople's standard of living and well-being. It involves economic growth along with improvements in health, education, and environmental quality.

9. Sustainability:

- Emphasizes meeting the needs of the present without compromising the ability of future generations to meet their own needs. It involves balancing economic growth with environmental preservation and social equity.