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Principles of Microeconomics syllabus - undergraduate economics
case study
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MICROECONOMICS = is the branch of economics concerned
SUPPLY FUNCTION – shows how quantity supplied is dependent
with the process of resource allocation of individual decision
on its determinants.
units or markets and the efficiency with which resources are
EQUILIBRIUM – condition of balance or equality.
allocated. “we could make predictions about the economy if we study
DETERMINANTS OF DEMAND
theories”.
1. Price of the good it self. 2. Consumers income or Average income of consumers -
THEORY – is an abstraction, a way of simplifying things. The real
consumers tend to buy more goods and acquire more services
world is a complicated place.
when their income increases.
-
RESPONSE TO A CHANGE IN INCOME DEPENDS ON THE TYPE OF
Is concerned with knowing which variables are important
to the issue at hand and which are not.
GOODS: A. NORMAL GOODS= GOODS = refers to a good for which quantity demand
CHARACTERISTICS OF MICROECONOMICS:
at every price increases when income rises.
1.
B. INFERIOR GOODS= GOODS= refers to a good for which quantity demand
Microeconomics looks at the decision of individual units
– it focuses on the choic es made by individual decision units such
falls when income rises. Example: Public transportation as the
as households, producers and firms.
income increases, they stop riding this public mode of
2.
transportation and instead drive their own car.
Microeconomics looks at how prices are determined – it
is concerned with how prices are determined in various types of
3. Consumers expectation of future prices. - When someone
market structures such as pure competition, monopoly,
expects higher prices in the future especially for basic
monopolistic competition, competition, and oligopoly. Microeconomics are
commodities, the tendency is to buy more of these goods today.
often called “price theory”.
4. Prices of related commodities/goods or Price & availability of
3.
related goods- changes goods- changes in the prices of alternative goods such as
Microeconomics is concerned with social welfare – it also
examines the efficiency, relative desirability, and choice of
pork and chicken will affect the quantity of fish demanded.
alternative methods by which resources are utilized to alleviate
SUBSTITUTE GOODS= are goods that can be used in place of other
scarcity. This microeconomics are welfare economics.
goods. Example coffee substitutes for tea.
4.
COMPLEMENTARY GOODS= GOODS = are gods that go together.
Microeconomics has a limited focus – it is just a part of
the economics discipline.
=they are related in such a way that an increase in the
5.
Microeconomics develop skills:
price of one good will cause a decrease in the demand for the
a.
Helps you develop your logical reasoning.
other good. For example: car and gasoline.
b.
Will help you develop skill in the construction and use of
5. Consumers' tastes and preferences.
models. c.
6. Population or size of market - an increase in the population Employs optimizing techniques that are useful for making
means more demand for goods and services.
decisions in a variety of situations.
7. Special influences - there - there are certain developments that
d.
influence demand for certain goods and services. Heat and
Are applicable to your personal resource allocation
decision such as your career choices or f inancial investments.
humidity, for instance, contribute to the demand for airconditioning equipment and light clothing.
?
THREE TYPES OF MODELS.
1.
Models to explain the resource allocation or choice
DETERMINANTS OF SUPPLY
decisions of individual households, producers and firms.
1. CHANGE IN TECHNOLOGY TECHNOLOGY - state of the art technology that uses
2.
high-tech machines increases the quantity supply of goods which
Models to explain how price and quantities exchanged
are determined in various types of market structures
causes the reduction of cost of production.
3.
2. COST OF INPUTS USED OR COST OF PRODUCTION - an increase
Models to examine the market economy as an inter-
related system.
in the price of an input or the cost of production decreases the quantity supplied because the profitability of certain business
SUPPLY AND DEMAND
decreases.
SOME TERMS TO REMEMBER:
3. EXPECTATION OF FUTURE PRICE - when - when producers expect
MARKET – a place where buyer and sellers interact and engage in
higher prices in the future commodities, the tendency is to keep
exchange.
their goods and release them when the price rises.
DEMAND – reflects the consumer’s desire for a commodity.
4. CHANGE IS THE PRICE OF RELATED GOODS
SUPPLY – the amount of a commodity available for sale.
5. GOVERNMENT 5. GOVERNMENT REGULATION AND TAXES -it TAXES -it is expected that
AGGREGATE DEMAND – the totality of a group of consumer
taxes imposed by the government increases cost of production
demand.
which in turn discourages production because it reduces
AGGREGATE SUPPLY – the totality of a group of producer’s supply.
producers' earnings and will translate to lower supply in the
DEMAND SCHEDULE – the quantities consumers are willing to buy
market.
of a good at various prices.
6. GOVERNMENT SUBSIDIES SUBSIDIES - or the financial aids/assistance
SUPPLY SCHEDULE – the quantities producers are willing to offer
given by the government reduces cost of production which
for sale at various prices.
encourages more supply.
MOVEMENT ALONG THE CURVE – a change from one point to
7. NUMBER OF FIRMS IN THE MARKET OR NUMBER OF SUPPLIERS.
another on the same curve. SHIFT OF THE CURVE – a change in the entire curve caused by a change in the entire demand or supply schedule. NON-PRICE FACTORS – also known as parameters, are factors other than price that also affect demand or supply. DEMAND FUNCTION – shows how quantity demanded is dependent on its determinants.