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Lets begin……
CURVES parameters on consumer demand. In addition
they should have an initial understanding of the CHAPTER 5, SECTION 6.1
revealed preference approach of motivating a
demand curve.
What is Economics?
• the study of how various societies use scarce resources
to produce commodities that are valued by people, and
design mechanisms to allocate them among different
people
• Concerned with two “central truths”
1. Resources are scarce
2. One mechanism of producing and distributing commodities
may be more efficient and/or more equitable than another
mechanism
• Scarcity of resources necessitates making choices, and
different ways of organizing an economy will provide different
incentives to agents in making their choices
• Economics is all about recognizing trade-offs in decision-
making, and resolving such trade-offs in intelligent ways
• “Economics is a study of mankind in the ordinary
business of life” – Alfred Marshall
The Progression of Economic Analysis
Customers
The Firm
Suppliers
• A firms engages with customers, existing and potential competitors, and input
suppliers in the process of value capture
• The ‘value net’ emphasizes that business is “war and peace” (i.e., concurrent
cooperation and competition, i.e., Co-opetition)
• In most of Microeconomics, we will study firm behaviour under the profit
maximization hypothesis – owners / managers take purposive decisions to
maximize long-term profits of a firm
Key Concepts so far
• Resources Defining a Market
Markets are usually defined in
• Scarcity terms of therapeutic classes of
• Trade-Offs drugs.