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1、CHAPTER1OUTLINE1.1TheThemesofMicroeconomics1.2WhatIsaMarket?1.3RealversusNominalPrices1.4WhyStudyMicroeconomics?Preliminaries●microeconomicsBranchofeconomicsthatdealswiththebehaviorofindividualeconomicunits—consumers,firms,workers,andinvestors—aswellast
2、hemarketsthattheseunitscomprise.●macroeconomicsBranchofeconomicsthatdealswithaggregateeconomicvariables,suchasthelevelandgrowthrateofnationaloutput,interestrates,unemployment,andinflation.THETHEMESOFMICROECONOMICS1.1TradeOffsConsumersWorkersFirmsConsume
3、rshavelimitedincomes,whichcanbespentonawidevarietyofgoodsandservices,orsavedforthefuture.Workersalsofaceconstraintsandmaketrade-offs.First,peoplemustdecidewhetherandwhentoentertheworkforce.Second,workersfacetrade-offsintheirchoiceofemployment.Finally,wo
4、rkersmustsometimesdecidehowmanyhoursperweektheywishtowork,therebytradingofflaborforleisure.Firmsalsofacelimitsintermsofthekindsofproductsthattheycanproduce,andtheresourcesavailabletoproducethem.1.1PricesandMarketsMicroeconomicsdescribeshowpricesaredeter
5、mined.Inacentrallyplannedeconomy,pricesaresetbythegovernment.Inamarketeconomy,pricesaredeterminedbytheinteractionsofconsumers,workers,andfirms.Theseinteractionsoccurinmarkets—collectionsofbuyersandsellersthattogetherdeterminethepriceofagood.THETHEMESOFM
6、ICROECONOMICS1.1TheoriesandModelsIneconomics,explanationandpredictionarebasedontheories.Theoriesaredevelopedtoexplainobservedphenomenaintermsofasetofbasicrulesandassumptions.Amodelisamathematicalrepresentation,basedoneconomictheory,ofafirm,amarket,orsom
7、eotherentity.PositiveversusNormativeAnalysis●positiveanalysisAnalysisdescribingrelationshipsofcauseandeffect.●normativeanalysisAnalysisexaminingquestionsofwhatoughttobe.THETHEMESOFMICROECONOMICSWHATISAMARKET?1.2●marketCollectionofbuyersandsellersthat,th
8、roughtheiractualorpotentialinteractions,determinethepriceofaproductorsetofproducts.●marketdefinitionDeterminationofthebuyers,sellers,andrangeofproductsthatshouldbeincludedinaparticularmarket.●arbitragePracticeofbuyingatalowpricea
