SLIDE BÀI GIẢNG MICROECONOMICS

1- UNIVERSITY OF FINANCE AND MARKETING MICROECONOMICS Chapter BASIC PROBLEMS OF ECONOMICS Assoc PhD.Trần Nguyễn Ngọc Anh Thư MBA Đoàn Ngọc Phúc MBA Phạm Thị Vân Anh MBA Lại Thị Tuyết Lan MBA Nguyễn Thị Quý MBA Ngô Thị Hồng Giang MBA Nguyễn Thị Hảo HCM City - 2013 1- In this chapter, look for the answers to these questions:  What kinds of questions does economics address?  What are the principles of how people make decisions?  What are the principles of how people interact?  What are the principles of how the economy as a whole works? CHAPTER PRINCIPLES OF ECONOMICS What Economics Is All About  Scarcity refers to the limited nature of society’s resources  Economics is the study of how society manages its scarce resources, including – how people decide how much to work, save, and spend, and what to buy – how firms decide how much to produce, how many workers to hire – how society decides how to divide its resources between national defense, consumer goods, protecting the environment, and other needs CHAPTER PRINCIPLES OF ECONOMICS 1- CLASSIFY  BASES ON RESEARCH SUBJECTS - Microeconomics - Macroeconomics  BASES ON METHODOLOGY - Positive economics - Normative economics 1- 1- Microeconomics and Macroeconomics  Microeconomics is the study of how households and firms make decisions and how they interact in markets  Macroeconomics is the study of economywide phenomena, including inflation, unemployment, and economic growth  These two branches of economics are closely intertwined, yet distinct: they address different questions CHAPTER THINKING LIKE AN ECONOMIST The Economist as Policy Advisor  As scientists, economists make positive statements, which attempt to describe the world as it is  As policy advisors, economists make normative statements, which attempt to prescribe how the world should be  Positive statements can be confirmed or refuted, normative statements cannot  Govt employs many economists for policy advice E.g., the U.S President has a Council of Economic Advisors, which the author of this textbook recently chaired CHAPTER THINKING LIKE AN ECONOMIST 1- 1- 3: Identifying positive vs normative ACTIVE LEARNING Which of these statements are “positive” and which are “normative”? How can you tell the difference? a Prices rise when the government increases the quantity of money b The government should print less money c A tax cut is needed to stimulate the economy d An increase in the price of gasoline will cause an increase in consumer demand for video rentals 1- ACTIVE LEARNING 3: Answers a Prices rise when the government increases the quantity of money Positive, describes a relationship, could use data to confirm or refute b The government should print less money Normative, this is a value judgment, cannot be confirmed or refuted 1- ACTIVE LEARNING 3: Answers c A tax cut is needed to stimulate the economy Normative, another value judgment d An increase in the price of gasoline will cause an increase in consumer demand for video rentals Positive, describes a relationship Note that a statement need not be true to be positive Why Economists Disagree  Economists often give conflicting policy advice  They sometimes disagree about the validity of alternative positive theories about the world  They may have different values and, therefore, different normative views about what policy should try to accomplish  Yet, there are many propositions about which most economists agree CHAPTER THINKING LIKE AN ECONOMIST 1- 10 1- 28 A C T I V E L E A R N I N G 2: Answers England, because its PPF is not as steep as France’s FRANCE ENGLAND 28 Economic Growth and the PPF With additional resources or an improvement in technology, the economy can produce more computers, more wheat, or any combination in between CHAPTER THINKING LIKE AN ECONOMIST Economic Economic growth growth shifts shifts the the PPF PPF outward outward 1- 29 The Shape of the PPF  The PPF could be a straight line, or bow-shaped  Depends on what happens to opportunity cost as economy shifts resources from one industry to the other – If opp cost remains constant, PPF is a straight line (In the previous example, opp cost of a computer was always 10 tons of wheat.) – If opp cost of a good rises as the economy produces more of the good, PPF is bow-shaped CHAPTER THINKING LIKE AN ECONOMIST 1- 30 1- 31 As the economy shifts resources from beer to mountain bikes: • Beer Why the PPF Might Be Bow-Shaped PPF becomes steeper  opp cost of mountain bikes increases Mountain Bikes CHAPTER THINKING LIKE AN ECONOMIST 1- 32 At point A, most workers are producing beer, even those that are better suited to building mountain bikes Beer Why the PPF Might Be Bow-Shaped A At At A, A, opp opp cost cost of of mtn mtn bikes bikes is is low low So, not have to give up much beer to get more bikes Mountain Bikes CHAPTER THINKING LIKE AN ECONOMIST 1- 33 At B, most workers are producing bikes The few left in beer are the best brewers Beer Why the PPF Might Be Bow-Shaped Producing more bikes would require shifting some of the best brewers away from beer production, would cause a big drop in beer output CHAPTER THINKING LIKE AN ECONOMIST At At B, B, opp opp cost cost of of mtn mtn bikes bikes is is high high B Mountain Bikes The PPF: A Summary  The PPF shows all combinations of two goods that an economy can possibly produce, given its resources and technology  The PPF illustrates the concepts of tradeoff and opportunity cost, efficiency and inefficiency, unemployment, and economic growth  A bow-shaped PPF illustrates the concept of increasing opportunity cost CHAPTER THINKING LIKE AN ECONOMIST 1- 34 basic problems of economics organization  What we should produce?  For whom we produce?  How is production? 1- 35 Economic Models  Market Economic Model  Command Economic Model  Mix Economic Model 1- 36 Our First Model: The Circular-Flow Diagram  The Circular-Flow Diagram: A visual model of the economy, shows how dollars flow through markets among households and firms  Includes two types of “actors”: – households – firms  Includes two markets: – the market for goods and services – the market for “factors of production” CHAPTER THINKING LIKE AN ECONOMIST 1- 37 Factors of Production  The factors of production are the resources that the economy uses to produce goods & services They include: – labor – land – capital (buildings & machines used in production) CHAPTER THINKING LIKE AN ECONOMIST 1- 38 1- 39 FIGURE 1: The Circular-Flow Diagram Households: Households:  own own the the factors factors of of production, production, sell/rent sell/rent them them to to firms firms for for income income  buy buy and and consume consume goods goods & & services services Firms CHAPTER Households THINKING LIKE AN ECONOMIST 1- 40 FIGURE 1: The Circular-Flow Diagram Firms Firms: Firms:  buy/hire buy/hire factors factors of of production, production, use use them them to to produce produce goods goods and and services services CHAPTER sell & THINKING LIKE AN ECONOMIST sell goods goods & services services Households 1- 41 FIGURE 1: The Circular-Flow Diagram Revenue G&S sold Markets for Goods & Services Firms G&S bought Households Factors of production Wages, rent, profit CHAPTER Spending Markets for Factors of Production THINKING LIKE AN ECONOMIST Labor, land, capital Income 1- 42 CHAPTER SUMMARY  As scientists, economists try to explain the world using models with appropriate assumptions  Two simple models are the Circular-Flow Diagram and the Production Possibilities Frontier  Microeconomics studies the behavior of consumers and firms, and their interactions in markets Macroeconomics studies the economy as a whole  As policy advisers, economists offer advice on how to improve the world CHAPTER THINKING LIKE AN ECONOMIST ... BASES ON RESEARCH SUBJECTS - Microeconomics - Macroeconomics  BASES ON METHODOLOGY - Positive economics - Normative economics 1- 1- Microeconomics and Macroeconomics  Microeconomics is the study