KINH TẾ VI MÔ Chapter 1 introduction

PRINCIPLES OF MICROECONOMICS NGUYEN THI MINH THU ¢ Instructor: ¢ Office: Nguyen Thi Minh Thu Faculty of International Nguyen Thi Minh Thu, FIE, FTU Economics, 2nd floor, Building B ¢ Email address: thu.nguyentm@gmail.com ¢ Phone number: 0902172177 TEXTBOOKS ¢  Mankiw, Principles of Microeconomics (5th edition), South Western CENGAGE Learning Nguyen Thi Minh Thu, FIE, FTU ¢  Krugman, Wells, Microeconomics (3rd edition), Worth Publishers ¢  Pyndick, Rubinfeld, Microeconomics (6th edition), Pearson Education International DON’TS ¢ BE LATE Nguyen Thi Minh Thu, FIE, FTU ¢ CHAT ¢ SLEEP ¢ USE PHONE 4 DOs ¢  Study textbooks before class ¢  Actively ¢  Do Nguyen Thi Minh Thu, FIE, FTU ¢  Read Applied Math participate class activities home works TOPICS IN MICROECONOMICS ü  ü  ü  ü  ü  NGUYEN Thi Minh Thu, FIE ü  Introduction to Microeconomics Demand and Supply Consumer Behavior Producer Behavior Market Structures Labor Market QUESTION ¢  Suppose Nguyen Thi Minh Thu, FIE, FTU that you and your friends is going to hold a junior prom ¢  100 students is going to attend for sure ¢  According to your calculation, each will have to pay 200,000 VND to cover payment for food (150,000 VND each) and music band as well as the hall ¢  One hour before the prom, one classmate says he wants to attend but just has 180,000 VND ¢  What is your decision? CHAPTER 1: PRELIMINARIES THEMES OF MICROECONOMICS 2.  ANALYSIS METHODS 3.  WHY STUDY MICROECONOMICS Nguyen Thi Minh Thu, FIE, FTU 1.  THEMES OF MICROECONOMICS Nguyen Thi Minh Thu, FIE, FTU THEMES OF MICROECONOMICS ¢  An economy consists of at least kinds of Households, Firms, Government ¢  Households: Consumers & Owners of production factors ¢  Firms: factors Nguyen Thi Minh Thu, FIE, FTU agents: Producers & Users of production 10 MODELING ¢  An economic model is a simplified representation ¢  Basic assumption: Ceteris Paribus ¢  Others: Prefer more to less, perfect information, etc ¢  Assumed goals -  Consumers: Utility maximization -  Producers: Profit maximization -  Government: Efficiency vs Equality Nguyen Thi Minh Thu, FIE, FTU of reality explaining how the economy works 19 THE ECONOMY Nguyen Thi Minh Thu, FIE, FTU 20 MARGINAL THINKING ¢  Rational Nguyen Thi Minh Thu, FIE, FTU people think at the margin ¢  Cost – Benefit analysis 21 EXAMPLE ¢  Suppose 500,000 VND c 100,000 VND a.  Nguyen Thi Minh Thu, FIE, FTU you are given a free ticket of Quang Dung live concert ¢  At the same time, Dam Vinh Hung also holds a show, for which you are willing to pay 500,000 VND The market price for DVH show ticket is 400,000 VND ¢  If you choose QD, you incur any cost? b 400,000 VND d VND 22 MARGINAL THINKING ¢ Total cost includes opportunity cost cost is the value of the second best option that you forgo Nguyen Thi Minh Thu, FIE, FTU ¢ Opportunity 23 MARGINAL THINKING ¢ Total benefit is the money value of ¢ Net benefit is the difference between total benefit and total cost ¢ NB Nguyen Thi Minh Thu, FIE, FTU what you gain = TB – TC 24 MARGINAL THINKING ¢  Marginal cost is the change in total cost resulting ¢  If ΔTC MC = ΔQ the total cost is continuous Nguyen Thi Minh Thu, FIE, FTU from the production of an extra unit of product MC = TC (Q) 25 € MARGINAL THINKING ¢  Marginal benefit is the change in total benefit ΔTB MB = ΔQ ¢  If the total benefit is continuous Nguyen Thi Minh Thu, FIE, FTU generated by an extra unit of product MB = TB (Q) € 26 MARGINAL THINKING ¢ NB Nguyen Thi Minh Thu, FIE, FTU max ⇒ NB = ó TB – TC = ó MB – MC = ó  MB = MC 27 EXAMPLE ¢  Real estate agent: 1.5% value of the property ¢  If the property can be sold at $300,000 the agent takes more efforts to advertise the house, the price can be $310,000 ¢  Do you think that he/she will? Nguyen Thi Minh Thu, FIE, FTU ¢  Normally 28 POSITIVISM VS NORMATIVISM ¢ Positive analysis: Answers è description and prediction ¢ Normative analysis: Answers Nguyen Thi Minh Thu, FIE, FTU questions like what , how , what if questions like what should be done? è prescription & recommendations 29 WHY STUDY MICROECONOMICS ¢  Corporate decision due to the fact that the fuel tank was installed near the rear collisions causing the fuel tank explode Nguyen Thi Minh Thu, FIE, FTU The Ford Pinto caused deaths and injuries Ford could easily improved safety by installing a shield between the tank and the collision 30 ¢  Cost Nguyen Thi Minh Thu, FIE, FTU = $11/car * 12.5 mil = $137 mil ¢  Benefit -  200 deaths * $200,000/death = $40 mil -  180 injuries * $67,000/injure = $12 mil -  The replacement costs to repair two thousand vehicles that would be destroyed without the safety device * 700 dollars per vehicle = $1.4 mil -  TB = $ 49.5 mil 31 WHY STUDY MICROECONOMICS ¢  Public policy design Phillip Morris put forward a proposal that the to smoke According to their analysis, the net gain is $147 mil, including tax revenue and the Nguyen Thi Minh Thu, FIE, FTU Czech Republic Government should allow citizens savings on housing, health care and pension funds for those who dies prematurely due to smoking (approximately $1200 each) 32 HOW CAN MICROECONOMICS TO YOU AT A PERSONAL LEVEL ¢  Rationalize your behaviors/ decisions the economic surroundings and Government policies ¢  Vote rationally Nguyen Thi Minh Thu, FIE, FTU ¢  Understand 33 ... activities home works TOPICS IN MICROECONOMICS ü  ü  ü  ü  ü  NGUYEN Thi Minh Thu, FIE ü  Introduction to Microeconomics Demand and Supply Consumer Behavior Producer Behavior Market Structures... prom, one classmate says he wants to attend but just has 180,000 VND ¢  What is your decision? CHAPTER 1: PRELIMINARIES THEMES OF MICROECONOMICS 2.  ANALYSIS METHODS 3.  WHY STUDY MICROECONOMICS