MICROECONOMICS Classroom Lecture Notes (3 credits, as of 2005)

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MICROECONOMICSClassroom Lecture Notes (3
credits, as of 2005)
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• based on Hal R. Varians
• Intermediate Microeconomics,
• Sixth Edition,
• referring to Pindyck and Rubinfelds
• Microeconomics,
• Fourth Edition.

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Chapter 0
Economics
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The source of all economic problems is scarcity.
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• Problem of trade-off, and choice.
• Economics, as a way of thinking,
• as a dismal science.
• Problems
• - solutions
• - hidden consequences.

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Main decision-making agents

• 1 individuals (household),
• 2 firms, and
• 3 governments.

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• Objects of economic choice are
• commodities,
• including
• goods and services.

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Main economic activities

• Consumption,
• Production, and
• Exchange.

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Microeconomics and macroeconomics

• to show the market mechanism (the invisible
  hand),
• to supplement it.

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The circular flow of economic activities.
product market
factor market
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The product market and the factor market.

• The market relation is mutual and
  voluntary.
• Positive issues and normative issues.

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Marginal analysis

• Relations between
• Total magnitudes,
• Average magnitudes, and
• Marginal magnitudes.

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• 1, MM is the slope of the TM curve
• 2, AM is the slope of the ray from the origin to
  the point at the TM curve

TM
MM(x)
AM(x)
x
x
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• 3, TM increasing (decreasing)
• if and only if
• MM gt 0 ( MM lt 0 )
• 4, If TM is at maximum or minimum,
• then MM 0

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• 5, AM increasing (decreasing)
• if and only if
• MM gt AM ( MM lt AM )
• 6, If AM is at maximum or minimum,
• then MM AM,
• or
• MM cuts AM at the latters
• maximum or minimum.