ECON1101 Week 1 – Lecture 1: Introduction to Economics Microeconomics 1

These flashcards cover the introductory concepts of economics, micro vs macro distinctions, positive vs normative analysis, fundamental principles of decision making, and the foundations of demand and supply.

Economics

The study of decision making and the process of allocating scarce resources among consumers and firms.

Microeconomics

The study of how households and firms make decisions and how they interact in specific markets as small economic units.

Macroeconomics

The study of economy-wide phenomena including inflation, unemployment, and economic growth.

Positive economics

Objective and factual statements about what economic agents do and why, limited to verifiable claims without value judgment.

Normative economics

Subjective statements regarding what economic agents should do, often involving value judgments and public policy choices.

Opportunity Cost

The value of the best alternative that must be given up to obtain some item.

Marginal change

A small, incremental change described as "a little more, or a little less."

Experimental Economics

The creation of data to test models; it establishes causation but typically has a narrower application.

Econometrics

The use of existing data to test models; it has a wider application but makes it harder to establish causation versus correlation.

Economic Model

An abstract, simplified explanation of how the economy, or a part of it, works, which ignores less important factors to focus on key variables.

Positive relationship

A direct association where both variables move in the same direction, represented by an upward sloping curve.

Negative relationship

An inverse association where variables move in opposite directions, represented by a down sloping curve.

Slope of a straight line

$$\text{Slope} = \frac{\text{change in y}}{\text{change in x}} = \frac{\text{rise}}{\text{run}}$$

Quantity demanded (QD)

The amount of a good that buyers are willing and able to purchase at a specific price.

Law of Demand

The principle that as the price rises, the quantity demanded falls, and as the price falls, the quantity demanded rises ($\uparrow P \rightarrow QD \rfloor$ and $\rfloor P \rightarrow QD 瀑$).

Market demand

The sum of all individual demands for a particular good or service, obtained by summing individual demand curves horizontally.

Ceteris paribus

A methodology in price analysis where all other factors affecting demand are held constant to observe the effect of a price change.

Movement along the demand curve

A change in the quantity demanded generated ONLY by a change in the price of the good or service.

Shift of the demand curve

A change in demand caused by factors other than price, such as income, preferences, or expectations, that alter the quantity demanded at every price.

Normal good

A good for which an increase in income leads to an increase in demand.

Inferior good

A good for which an increase in income leads to a decrease in demand.

Substitutes

Related goods where an increase in the price of one leads to an increase in the demand for the other (e.g., Coca-Cola and Pepsi).

Complements

Related goods where an increase in the price of one leads to a decrease in the demand for the other (e.g., bread and butter).