Principles of Microeconomics
Course Duration: Fall 2024 - Spring 2025
Course Code: ECON1101
Definition of Scarcity: The limited nature of society’s resources.
Implication: Society cannot produce all goods and services that people desire due to limited resources.
Economics: A field that addresses how to manage the allocation of these scarce resources.
Focus: How households and firms make decisions.
Interactions: Examines how these decisions interact within markets.
Focus: Study of economy-wide phenomena, including:
Inflation
Unemployment
Economic growth
People Face Trade Offs: Choosing one option often means giving up another.
Efficiency vs. Equality: Ensuring that resources are used efficiently while assessing the fair distribution of economic benefits.
Opportunity Cost: The value of the next best alternative that must be forgone to pursue the chosen option.
Rational People Think at the Margin: Decision-making involves small incremental adjustments rather than all-or-nothing choices.
People Respond to Incentives: Changes in costs or benefits influence individual behavior.
Trade Can Make Everyone Better Off: Voluntary trade allows participants to specialize and enjoy a greater variety of goods.
Markets Organize Economic Activity: Market economies coordinate economic activities through the price mechanism.
Government Role: Government can intervene to improve market outcomes in the case of:
Market failures
Externalities: Costs or benefits incurred by third parties not involved in a transaction.
Market power: The ability of a firm to influence prices.
Standard of Living: A country’s ability to produce goods and services determines its standard of living.
Productivity: Key driver of economic growth and higher living standards.
Inflation and Money Supply: Prices tend to rise if the government prints too much money.
Short-Run Trade-off: In the short run, there may be a trade-off between inflation and unemployment.
Business Cycle: Refers to fluctuations in economic activity such as production and unemployment.