Contact                                                                   Textbook
                  • Ing. Jiří Alina                                                       • http://bookboon.com/cs/microeconomics-uk-ebook
                  • Department of Economics– No. 13
                  • Tel. 38777 2500                                                       • Microeconomics / Robert S. Pindyck, Daniel L. Rubinfeld
                  • 602 317 457                                                           •  Understanding microeconomics / Russell S. Sobel a kol. 
                  • E-mail: jalina@ef.jcu.cz                                              •  Understanding macroeconomics / Russell S. Sobel a kol. 
                                                                                          •  Principles and applications of macroeconomics / Marc 
                                                                                            Lieberman, Robert E. Hall 
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                  Introduction                                                              What Is Economics?
                  • What is economics                                                            •  Economicsstudies the choices that 
                  • 2 ways                                                                          can be made when there is scarcity.
                  • The economic way of thinking                                                 •  Scarcity is a situation in which 
                                                                                                    resources are limited in quantity 
                                                                                                    and can be used in different ways.
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                  What Is Economics?                                                      Positive versus Normative 
                       •  Because our resources are limited,                              Analysis
                          we must sacrifice one thing for                                           • Positive economics predicts 
                          another.                                                                    the consequences of 
                       •  Economists are always reminding us                                          alternative actions, answering 
                          that there is scarcity—that there are                                       the questions, “What is?” or 
                          tradeoffs in everything we do.                                              “What will be?”
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                   Positive versus Normative                                                                Decisions in a Modern Economy
                   Analysis                                                                                      • Economic decisions are made at 
                               • Normative economics answers                                                        every level in society.
                                  the question, What ought to be?                                                • The choices made by individuals, 
                                  Normative questions lie at the                                                    firms, and governments answer three 
                                  heart of policy debates.                                                          questions:
                                                                                                                        1.  What products do we produce?
                                                                                                                        2.  How do we produce the products?
                                                                                                                        3.  Who consumes the products?
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                    Economic Analysis                                                                      The Economic Way of Thinking
                    and Modern Problems
                           • Economic analysis provides                                                          • Three elements of the economic way of 
                             important insights into real-world                                                     thinking:
                             problems.                                                                                1. Use assumptions to simplify
                           • Economists attempt to diagnose and 
                             provide solutions to problems such                                                            • Eliminate irrelevant details and focus on what 
                             as traffic congestion, poverty in                                                                really matters.  Keep in mind that simplifying 
                                                                                                                              assumptions do not have to be realistic.
                             Africa, or the problems of an entire 
                             economy.
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                    The Economic Way of Thinking                                                          The Economic Way of Thinking
                           •  Three elements of the economic way of                                              •   Three elements of the economic way of 
                              thinking:                                                                              thinking:
                               2. Isolate variables—Ceteris Paribus                                                   3. Think at the margin
                                     • Economists are interested in exploring                                              • A small, one-unit change in value is called a 
                                       relationships between two variables. A                                                 marginal change.
                                       variableis a measure of something that can 
                                       take on different values.                                                           • Economists use the answer to a marginal 
                                     • The expression ceteris paribusmeans that                                               question as the first step in deciding 
                                       the effect of other tendencies is neglected                                            whether to do more or less of something.
                                       for a time.
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                    The Economic Way of Thinking                                                            Preview of Coming Attractions:
                                                                                                            Microeconomics
                           • A key assumption of most economic 
                             analysis is that people act rationally,                                             • Microeconomics is the study of the 
                             meaning that they act in their own                                                     choices made by households, firms, 
                             self-interest.                                                                         and government, and of how these 
                           • Rational people respond to                                                             choices affect the markets for goods 
                             incentives.                                                                            or services.
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                     Preview of Coming Attractions:                                                         Preview of Coming Attractions:
                     Microeconomics                                                                         Macroeconomics
                     • We can use microeconomic analysis to:                                                     •   Macroeconomics is the study of the 
                          1. Understand how markets work and predict                                                 nation’s economy as a whole.
                               changes.                                                                          •   We can use macroeconomic analysis to:
                          2. Make personal and managerial decisions.                                                  1.  Understand why economies grow.
                                                                                                                      2.  Understand economic fluctuations.
                          3. Evaluate public policies.                                                                3.  Make informed business decisions.
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                  The END 
                     •  Sources:
                     •  Mankiw: Principles of Microeconomics
                     •  Website of OSWEGO University
                     •  Website of  Rio Hondo Faculty 
                     •  Microeconomics / Robert S. Pindyck, Daniel L. Rubinfeld 
                     •   Understanding microeconomics / Russell S. Sobel a kol. 
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