MICROECONOMICS

ECS201

WELCOME

WHAT ARE WE DOING TODAY?

Who am I?What to do and not to doMeans of communicationADC servicesUnisaAnalyze your study skillsWhat do you see?Chapter 1Chapter 2Questions

ADC SERVICES

Delivering academic support regarding:Time ManagementStudy SkillsExam Preparation and TechniquesStress Management

Professional development of lecturers.

PreparePre-requisiteParticipationHomeworkTardinessCell phonesEat and Drink

To do or not to do …

MEANS OF COMMUNICATION

After class Student Support Office @ student reception By appointment By e-mail: lvdvyver@varsitycollege.co.za Phone: (012) 348-2551 Website!!!

www.liezavandervyver.weebly.com

UNISA PROCEDURES Registrations Tutorial letter 1 MyUnisa Assignments Important dates Prescribed textbook Exam entry

YOUR UNISA REGISTRATION

Questionnaire Different types of learners Analyse Assist

LET’S ANALYZE YOUR STUDY SKILLS

WHAT DO YOU SEE?

WHAT DO YOU SEE?

CHAPTER 1Preliminaries

What is Microeconomics?

OUTCOMES Nature and importance of

microeconomics The workings of a market Real and Nominal prices

Economics

Microeconomics

Macroeconomics

Public Economics

MonetaryEconomics

Finance Economics

International Economics

DevelopmentEconomics

Equips us to answer questions Explain irregularity in our everyday lives Provide the background for other economic

disciplines Knowledge of basic economic theory Application of basic economic theory Gain insight in social and economic events

WHY?

Help us predict what is likely to happen

WHAT IS MICROECONOMICS?

Trade-offs Prices and Markets Theories and Models Positive and Normative analysis Nature of Markets Real versus Nominal prices Why study Economics?

THEMES OF MICROECONOMICS

Optimal Trade-Off

Consumers- Limited income

- Trade-off for maximized well-being

Workers- When to enter

workforce- Work or

education?

Firms- What to produce?

- Resource available

THEMES OF MICROECONOMICS- TRADE-OFFS

Theory of the firm

Consumer Theory

•Trade-offs•e.g. Labour: Work for pleasure•Centrally planned economy = Prices set by government•Market economy = Prices determined by consumers, workers, firms

Prices

•Interactions to determine price

Markets

Prices and Markets

LIMITED RESOURCESTHEORIES AND MODELS

Theories = Explanations & Predictions

Model = Mathematical representation

LIMITED RESOURCESPOSITIVE AND NORMATIVE

ANALYSIS

Positive- Central to microeconomics

- Explanations and predictions

- Describe relationships of cause and effect

Normative- Go beyond explanations

and predictions- “What is best?”

- Examine questions of what ought to be

MARKET

Definition: Collection of buyers and sellers Through actual or potential interactions Determine price of a product Or, set of products

Market = More than an industry Industry: Collection of firms that sell

same/closely related products. Potential interactions & actual interactions Arbitrage:

Significant difference in price of commodity Practice of buying low @ one location & sell

high at another location

MARKET

Competitive marketPerfectly competitive: Many buyers and

sellers e.g. agricultural markets Noncompetitive market

Many producersCartel: Group of producers act collectively

Market price:Competitive market = Single price = market

priceNot perfectly competitive = Different prices

Average price = Market price

MARKET

Market Definition:Buyers and sellers

Extent of the market:Determine which buyers and sellersBoundaries of a marketGeographical and i.t.o. range of products

Market definition importance:1. Understand who is actual and potential

competitors2. Public policy decisions

REAL VS NOMINAL PRICES

Nominal prices:Absolute price“Current-dollar”

Real prices:Price relative to aggregate measure of

prices“Constant-dollar”

Consumer Price Index Producer Price Index

IMPOTANT CONCEPTS CETERIS PARIBUS

Assumption used when designing models.Meaning: All variables other than the one

economist use will remain unchanged.Latin expression: “All other things being

equal” EQUILIBRIUM

Important in economic theoryA situation, once it has been reached, tends

to persistAll factors in balance.

IMPORTANT CONCEPTS

IMPOTANT CONCEPTS PRICES

MACRO = Absolute prices i.e. price of goods and services

MICRO = Relative prices i.e. relationship between price in question and price of other products

RATIONAL INDIVIDUALSBehave rationallyWell off given limitations

MALE OR FEMALE?“He” merely used for practical reasons

IMPORTANT CONCEPTS