CHAPTER INTRODUCTION TO MICROECONOMICS Content Microeconomics Basic questions in economics Economic choice Chapter 1: Introduction I Microeconomics The economy Household Input market Government Output market Firm I Microeconomics The economy - There are at least members in any economy, which interacting with each other in a certain regime Interacting regimes: - planning economy (1) - market economy (2) - mixed economy (3) Cuba US, UK, Japan Hong Kong I Microeconomics Some definitions Scarcity: When the needs are greater than the supplying ability Commodities: Tools to satisfy people’s needs Resources: Inputs used to produce commodities to satisfy people’s needs, including: + Labour (L) + Materials (M) + Capital (K) I Microeconomics Microeconomics and macroeconomics Economics: study how society allocates scarce resources for competitive goals Microeconomics:study the behavior of each member in the economy Macroeconomics: study the economy as a whole Microeconomics Macroeconomics Econometric ECONOMICS II Basic economic issues questions WHAT? HOW? FOR WHOM? III Economic choice Choice’s principles - Need to choose because of scarce resources If resource is already spent on A, it can not be spent on B - Many ways to spend resources → easy to choose Choice’s target - Household: Optimize benefit - Firm: Optimize profit - Government: Optimize social welfare III Economic choice Choosing tool - Opportunity cost (OC): The value of the best missed chance when making a choice - Marginal thinking + Marginal cost (MC): The change in total cost resulting from a change from quantity MC = ∆TC = TC '( Q ) ∆Q + Marginal benefit (MB): The change in total benefit resulting from a change from quantity MB = ∆TB = TB '( Q ) ∆Q .. .Chapter 1: Introduction I Microeconomics The economy Household Input market Government Output market... macroeconomics Economics: study how society allocates scarce resources for competitive goals Microeconomics:study the behavior of each member in the economy Macroeconomics: study the economy as... which interacting with each other in a certain regime Interacting regimes: - planning economy (1) - market economy (2) - mixed economy (3) Cuba US, UK, Japan Hong Kong I Microeconomics Some