Introduction of Microeconomics

Ten Principles of Economics

How people make decisions

How people interact

How the economy as a whole works

  1. People face trade-off
  1. Opportunity Cost
  1. Marginal Changes
  1. Incentives
  1. A country's standard of living depends on its ability to produce goods and services
  1. Trade can make everyone better off
  1. Market economy
  1. Government Intervention
  1. Prices rise when the government prints too much money
  1. Society faces a short-run trade-offs between inflation and unemployment

Thinking like an Economist

  1. Think in terms of alternatives
  1. Evaluate the cost of individual and social choices
  1. Examine and understand how certain events and issues are related

Economic Models

  1. The circular Flow Diagram
  1. The production Possibilities Frontier

The circular-flow diagram is a visual model of the economy that shows how dollars flow through market among households and firms

The production possibilities frontier is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

Firms

  1. Product and sell goods and services
  1. Hire and use factors of production

Households

  1. Buy and consume goods and services
  1. Own and sell factors of productuin

Concepts illustrated by the production possibilities frontier

  1. Efficiency

3.Trade-offs

  1. Opportunity Cost
  1. Economic growth