Intermediate microeconomics

Intermediate Microeconomics

Li Yaling

(Ph.D. in economics, doctoral supervisor in business

management)
Division)
Research direction: economic management and human
resource management.
Yunnan University School of Business Administration and Tourism
Management
one
L/O/G/O
chapter one

Guiding
theory
main content

 Economics, economics
 Research contents and methods of economics

 Basic problems of economics


Differences and relations between
microeconomics and macroeconomics

economic system

Theoretical framework of microeconomics
three
Section 1 Research Contents and Methods of
Economics
First, the meaning of economy and economics

(1) Economy
Economy

four
Section 1 Research Contents and Methods of
Economics
First, the meaning of economy and economics
Table 1 economy[1]
(1) (often the economy) [c] the relationship between production, trade and the
supply of money in a partial country or region ("the production of a country or
region.
The relationship between trade and money supply) economy; Economic situation;
Economic structure.
② [c] A country, when you are thinking about its economic system (in terms
of economic system) countries; Economic system.
(3) [c, u] the use of the time, money, ect. that is available in a way that avoids
being wasted ("you can get time, money, etc.) to save; Save; Thrift:

[1] Oxford Advanced English-Chinese Dictionary, Oxford University Press, Commercial

Press, 2004, No.542.
Page.
Table 2 between economy and economy
econ economy
omy
anci (1) to help the people; Governing the country.
ent
Chin
ese
cont (2) the sum of social relations of production. It (2) country (in terms
emp is the foundation on which political and of economic system);
orar ideological superstructures are built. economic system
y .
Chin
ese ③ Economic activities. Including the ① Economy; economic
lang
uage production, distribution, exchange or condition
consumption of products. ; Economic structure.
(4) the floorboard of a country's national
economy, or refers to various departments of
the national economy, such as industrial
economy and agricultural economy.
(5) refers to the family or personal living ③ saving; Save;
Thrift.
expenses. For example, the family is in
financial difficulties.
⑥ Use less manpower, material resources and
time to achieve greater results. Such as:
economical and practical.
(2) Economics
Economics
 First, what is economics?
"Political economy is a
theoretical analysis of
modern bourgeois
society.
Therefore, it is based on
developed bourgeois
relations "[1].

[1] Engels: Karl Marx's Critique of

Political Economy, Marx's Critique of
Political Economy, People's Publishing
House, 1976, p. 169.
Friedrich engels (1820
-1895), German thinker,
philosopher, revolutionist,
educator, military theorist,
great mentor of proletariat
and working people all
over the world, and one of
the founders of Marxism.
 First, what is economics?

"To truly understand capitalism, there must be a

theoretical framework. However, there are many
theories that study capitalism. Political
economics, which came out with capitalism, is
divided into different economic paradigms:
classical paradigm (Ricardo), Marxist paradigm,
neoclassical approach (Walras) and Keynesian
paradigm.

[1][ France] Michelle Yusong: "Ten Lectures on Capitalism", Social

Science Academic Press, 2013, p. 25.
 mercantil
Agronom
e system
y school
The 17th and
Quesna
18th
y Adam
1758 Smith centuries
1776 century
classical
school

Davi d Ri car do
1817 muller Malthus
1798
neoclassical economics
socialism 1848
Karl Walras,
Marx, Marshall, Fei
Keynes
1867 Snow, 1880-
1936
Lenin, 1917 1910

Modern

Genealogy of economics
 "Economics is the science
studying economy at the of
individual level and the whole
social level" [1].

[1] Paul krugman Robin Wellmassa

olney: Essentials of Economics,
published by China Renmin
University.
Press, 2011, page 2.

Paul krugman (1953-)

He is currently a professor
at Princeton University. He
won the Clark Prize in
Economics in 1991 and the
Nobel Prize in 2008.
Scholarship award.
 Specific research field:

econom science
The whole
way Personal
economics
Research object and specific research field
 Basic ideas in social and economic life
1. Respect for individual freedom 2. For public welfare
attach importance to
(private sector)
Public (government) departments
Three principles: 1.
Private
property
system
2. Principle of freedom of contract Consumers (freedom
3. The principle of self- of consumption
choice, career choice,
responsibility migration and
Producer (freedom of business) residence choice)

Market exchange
N
ati
on
al Privat
lif
e
Public

The research object and specific research field of economics

 First, what is economics?

"Economics is a social science that studies how the

economy works." [1]

[1] Danny Roderick: Rules of Economics, CITIC Publishing House, 2017, p. 6.

 Definition of research field

"Today's most economists don't like to analyze

problems in such a broad background, but
wholeheartedly regard capitalism as a market
system, thus emphasizing its functional aspects
rather than its institutional structure" [1].

[1] Brenner, Robert L. Haier: Capitalism, New palgrave Dictionary of

Economics, Volume I, Economic Science Press, 1996, p. 380.
 Definition of research field

consumer
producer (Freedom of consumption ch
Market exchange
(Business
from
by)

N
Specific Private fields
research wealthof economics
a
ti government
o
n Publi
a
 Definition of research field

producer consumer
(enterprise) (family)
market

government

Specific research fields of economics

Section 1 Research Contents and Methods of
Economics
Second, the research content and role of economics
(A) the research content of economics
Economics studies the effective allocation and utilization of scarce resources.
Resources are scarce, and if resources are used for one purpose, other uses
must be abandoned. Economy is to explain how to use resources for the most
effective use by comparing costs and benefits, that is, to maximize resources.
Subjects of economic activities: individuals (consumers), enterprises and
countries (governments).

For individuals, how to provide factors to earn income, how to divide
income into C+S, and how to transform S into I, so as to maximize life
income and enjoyment.

For enterprises, it is necessary to purchase different factors of production
and produce different products with limited funds in order to maximize
profits.

For the country: maximize social welfare with existing resources.

19
 microeconomics

 Micro-individual behavior and the science of how to

achieve resource allocation through market
competition.

 Micro-individuals: manufacturers and consumers

 Core: market mechanism

 Macroeconomics


Macro-overall behavior
 Including: economic growth, employment, price stability
(currency
Inflation), balance of
payments
, economic cycle,
macroeconomic policy
 Microeconomics and macroeconomics
Problems in microeconomics research

 Microeconomics takes a single economic unit

(household, manufacturer) as the research object, and
studies the economic behavior of a single economic unit
and how to determine the individual values of the
corresponding economic variables.
 The main contents of microeconomics include price
theory, consumer behavior theory, production theory,
firm equilibrium theory and distribution theory.
 The three basic problems to be solved by
microeconomics are all related to how the market
economy and the price mechanism of the society operate,
so the center of microeconomics is the price theory.

22
 Microeconomics and macroeconomics
Problems in Macroeconomic Research

 Macroeconomics takes the whole national economic activity

as the object of investigation, and adopts the gross analysis
method to study the decisions and changes of the relevant
gross in the economy.
 Focusing on national income and aiming at the welfare of
the whole society, this paper studies the coordinated
development of product market, money market and balance
of payments from the perspective of total supply and
demand, and how to make full use of resources through
macro-control.

 It studies global issues such as social employment, price

level, economic growth and economic cycle.
23
 The connection between microeconomics and
macroeconomics
Although microeconomics
different in and objects
specific research macroeconomics are
and analysis
methods, they are closely related as two major
components or branches of modern western economic
theory system.
 First of all, the institutional premise assumed by the two is the same.

 Secondly, apart from the difference between individual analysis and total
analysis,
 Most of them are the same.

 Thirdly, microeconomics is the foundation of macroeconomics.

24
 Resource allocation mode


Economics is a systematic science about the allocation of
scarce resources to different and competing needs and
making them meet to the greatest extent.


How to allocate resources?

plan

market

 Core: price mechanism

Two problems that western economics tries to
solve;


1. Publicize the rationality of
allocating resources by the market
under the private property right
system and fully competitive
environment;
 2. Under the system of private
property rights and full
competition, provide policy
suggestions for improving and
saving the system of market
allocation of resources.
26
Section 1 Research Contents and Methods of
Economics
Second, the role and research content of economics
(B) the role of economics
-Pick up the sword of economics.
The function of economics is to provide a set of tools and
methods to analyze the problem of resource allocation.

27
Section 1 Research Contents and Methods of
Economics
Third, the basic problems of economics


What products and services are produced and how
much?
 How to produce products and services

Who produces products and services for?

28
Section 1 Research Contents and Methods of
Economics

Fourth, research methods

(A) empirical analysis methods and normative analysis
methods
-Morality and immorality in economics


The fundamental difference is the attitude towards value
judgment.

29
Section 1 Research Contents and Methods of
Economics

Fourth, research methods

(B) the use of assumptions-assumptions, theory and reality

The art of scientific thinking is to decide what assumptions to
make-the premise of establishing an economic model.

The purpose of making assumptions is to grasp the center of the
research problem first, so as to draw meaningful conclusions.

Hypothesis is a method to simplify reality, which grasps the
essential characteristics and ignores other irrelevant details. This
is the correct way to understand the world.
Economic assumptions:
-"scarcity".
-"economic man" hypothesis (interest principle)
-In terms of personal basic rights, traders have complete freedom of choice.
-No transaction cost, complete information and unchanged system and
technology.
30
Section 1 Research Contents and Methods of
Economics

Fourth, research methods

(3) Equilibrium analysis method

 Equilibrium in economics means that two
opposite economic forces are in a relatively
balanced state, which can be destroyed or re-
established due to changes in economic forces.
 Equilibrium analysis is different from local
equilibrium analysis and general equilibrium
analysis.

31
Section 1 Research Contents and Methods of
Economics
Fourth, research methods
(D) Marginal analysis method
 The so-called marginal means marginal, extra and
additional. The marginal value is the value that causes the
dependent variable to change when the independent
variable changes by one unit.
 Marginal analysis is a method that uses marginal value as
the basis of decision-making. It embodies a forward-
looking idea, which is applicable to all economic decisions.

For example, how do airlines with

insufficient customers make decisions?
Case: the fare of the last passenger
When a civil aviation company flies from A to B, the total
cost of each passenger is 280 yuan. So, when there are
vacancies on the plane, should it be sold to customers at a
lower fare (for example, each 200 yuan)?

32
 Section 2 Economic System
I. The role of the economic system
Case: Lessons from France's contract tax system
Economic system is a rule that regulates people's
economic behavior. People conduct economic activities
under a certain system, that is, they act according to the
rules. Including tangible and intangible systems.

 Institutions regulate people's behavior in the economy.

 The system provides a stimulus for people to engage in
economic activities.
 A good system can also reduce the cost in economic
activities.
Eg. property right system and monetary system
33
 Second, the importance of property rights
Case: Historical Achievements of Enclosure
Movement
In the real world where transaction costs exist, the
arrangement of property rights system has a vital impact on
economic efficiency.

The establishment of property rights can improve

economic efficiency, and the key lies in reducing transaction
costs. At the same time, property rights provide incentives.

The premise of market economy is the establishment

of private property rights.
34
 property rights

Coase (Ronald Coase, 1991 Nobel Prize in

Economics) Theorem
coase theorem
When the cost of negotiation and negotiation
between the two parties is very small, as long as the
property right is clearly defined, it doesn't matter if
the property right is given to either party of the
transaction, and both parties can achieve the most
effective use of resources through negotiation.

Coase's second theorem

Different property rights systems will lead to different resource allocation
and efficiency. Property right system is an important endogenous variable
that determines economic efficiency. One of the important responsibilities
of the government is to define all kinds of property rights in social and
economic life as clearly as possible.
 Property rights: the story of factories and f
The factory is in the upper reaches of the river, and
fishermen live by fishing. There are different solutions
to the problem of pollution discharge from factory
production.
Profits of the Fisherman's Zong
factory profit li
moisten
Factories do not build filtration devices, 500 100 600
and fishermen do not build treatment
plants.
Factories build filtration devices, but 300 500 eight
fishermen don't build treatment plants. hund
red
Factories do not build filtration devices, 500 200 700
and fishermen build treatment plants.
Factories build filtration devices and 300 300 600
fishermen build treatment plants.
Property right allocation and result

Factories have the Fishermen have the

right to discharge right to clean water.
pollutants.

Factories and fishermen don't cooperate

Factory profit 500 300
Fisherman's profit 200 500

Cooperation between factories and

fishermen
Factory profit 550 300
Fisherman's profit 250 500
 Politics and property rights

•
political system
–
Monarchy, constitutional monarchy, republic.

Democracy and legal system, political organization form, election
system, political party system, etc.
–
Legislative, executive and judicial power

•
The core issue of the political system
–
The political system determines the arrangement of property
right system.
 Property right protection

 China's feudal society for thousands of years

practiced private property rights,
However, private property rights are not
guaranteed.
 "Under the sky, is it the land of the king? Leading the
land, is it a king?
."
 "If you want me to die, I have to die; The father wants his
son to die, but the son can't
Immortality. "
 Is property right so important to China's c
• Property rights determine income distribution.
• Unclear property rights lead to property rights being
controlled by a few insiders, forming an "internal interest
group".
– If state-owned enterprises are collectivized, privatized and socialized
in their rights and interests, it is also a de facto privatization. In
addition, I think it is also privatization to deprive farmers of their land
and take over farmers' ownership for business. -Hu Deping
• Lack of effective external supervision mechanism
• Observation results:
– The country is rich and poor.
– corruption
– Widening gap between rich and poor
 Private property rights and public property
• Private property right high,
–
Internalization of external problems property
–
But when the transaction cost is high, the rights
market also fails. reform
government
should


• What should I do when the public be

property right is very large? carried
– Sunshine and transparency are the best out.
preservatives.  privati
zation

The essence is external supervision.
– However, when the cost of supervision is
Wen Jiabao: Let power.
Run in the sun
III. Economy: Capitalism
"The theme of this book
is
, the evolution of
capitalism (as the
main form of
economy and
society in
western
civilization). ”
[1]

[1] Robert L. Haier

Robert l Haile brenner (1919-2005): a
famous American economist, once served as
the vice president of American economics.
brenner William Milberg:
The Origin of Economy and
Society, Gezhi Publishing
House, Shanghai Sanlian
Bookstore, Shanghai
People's Publishing House,
2010, p. 163.
What is capitalism?
"'Capitalism' is a commonly used term, which
appears in people's writings and spoken language from
time to time. However, it is very difficult to give a proper
definition to this term. Not only do the authors of various
books and periodicals insist on their own opinions, but
even if we quote the word' capitalism', we may have
different intentions before and after, and we are even more
afraid of being misunderstood by others. If this problem is
not clarified, it may become the root of ideological
conflicts in society, or it may respond to everyone's
outlook on life, making us feel confused about the facts
and feel that we have no master. " [1]

[1] Huang Renyu: Capitalism and the 21st Century, Life, Reading and New Knowledge
Joint Publishing Company, 1997, p. 1.
 Basic ideas in social and economic life
1. Respect for individual freedom 2. Pay attention to public welfare
(private

Public (government) part

Three principles: 1. Private property system
Principle of freedom of contract
The principle of self-responsibility

Consumers (freedom of consumption choice, career choice

Producer (freedom of business)

National life Private wealth
Market exchange

Public
free enterprise system
See "Modern Japanese Economic Events", edited by Chinese and Japanese economic experts, China
Social Sciences Press, Japan General Research Publishing Co., Ltd., 1982, p. 154.
Capitalism (capitalism)

capitalism ： an economic system in which a

country’s businesses and industry are controlled and
run for profit by private owners rather than by the
government [1] 。
Capitalism: an economic system in which private
owners for profit rather than the government control
and promote the production and exchange activities
of a country.
[1] Oxford Advanced English-Chinese Dictionary, Oxford University Press,
Commercial Press, 2004, p. 235.
 Free enterprise system (capitalist system)
 "Free enterprise system (capitalist system): an
economic system characterized by private ownership
and private initiative. For the free enterprise system,
that is, the capitalist system, the most basic is the
concept of private property, ownership and the use of
property to earn income
Enter. ” [1]

[1] D. greenwald: Dictionary of Modern Economics, Commercial Press, 1981, p. 189.

(1) "private property leads to the establishment or
production of private enterprises. Manufacturers
(corresponding to the producers in Figure 1-3) can
freely hire workers, freely produce and freely set
prices. Moreover, private initiative keeps production
going. The driving force of private initiative is the
owner's desire to make profits. " [1]

[1] D. greenwald: Dictionary of Modern Economics, The Commercial Press, 1981, p. 189.
(2) "Because of private ownership and private
initiative, the free enterprise system is characterized by
the fact that most decisions are made independently by
producers and consumers. The function of controlling
the economy and coordinating many independent
decisions is realized by using the free price system.
People mainly rely on (city)
Field) the power of competition to ensure that the free price
system effectively and smoothly
Play a role. ” [1]

[1] D. greenwald: Dictionary of Modern Economics, Commercial Press, 1981, p. 189.

(3) "The free enterprise system means that the government
has less control over the economy. The government's
activities are limited to a few areas, such as national defense
and public security. In terms of production and pricing, it is
hoped that the government will adopt a laissez-faire stance
with little or no control. " [1]

[1] D greenwald: Dictionary of Modern Economics, Commercial Press, 1981, p. 189.

 Fourth, the market economy

(A) the comparison between planned economy and market

economy
Two different means of resource allocation

(B) the characteristics of the market economy

1, the market economy is a competitive economy.
 Driven by interests, social resources are optimally
 allocated.
Talent economy-competitive era (if enterprises do not
 participate in competition, they will not.
There is room for survival)
 Market economy has its evaluation criteria.
(It is an evaluation of the result-whether it can be
profitable)
50
 2 Market economy is a credit economy
 personal credit
a. Economic credit is risky and volatile.
b. Social credit punctuality
 Enterprise credit
a. Internal credit
b. External credit
c. Bank credit financial credit

51
 3 Market economy is an open economy.
 Open to the international market
 The domestic unified market is absolutely open
 An enterprise is an open system (the access of people,
money and things)
 Individuals should have an open mind.
At present, the advanced organizational form: EU.
China's current international dependence (foreign trade
 volume/GDP)
4 Market economy is a knowledge economy (called new
economy in America).
commercial knowledge

fifty-two
 Scientific and technological knowledge
Welfare of a market-oriented society with scientific and
technological knowledge
5 Market economy is a legal economy.
 Legal system ensures the orderly operation of
competition.
(Traditional and modern, the biggest difference between
planning and market is whether there is competition or not)
 Legal System Guarantees Credit System ——
 Contract Economy (legal IOUs) Legal System
 Guarantees Opening.
Legal protection of intellectual property rights

53
 Section III Basic Concepts of Economics

I scarcity, production possibility and opportunity cost

(A) Scarcity
Scarcity mentioned here does not refer
to the absolute quantity of goods or
resources, but refers to the fact that no
amount of resources is enough
compared with the infinity of human
desires. In this sense, scarcity is
relative. In another sense, scarcity
exists in all times and all societies, so it
is absolute.
54
Section III Basic Concepts of Economics
(2) production possibility frontier

Under certain technical conditions, the
maximum amount of various goods or
services that can be produced by all the
resources of a society or a country is always
certain.
 Production Possibility Boundary (PPF),
which graphically describes the principle of
constrained selection and scarcity, shows all
the combinations of products and services
that can be produced when all the resources
of society are used efficiently.

55
Section III Basic Concepts of Economics

(2) production possibility frontier

Cannon (ten
B
15 A
C
12
D
nine
E
six

three
F Butter (ten
0 1 2 3 4 5

production possibilities curve

fifty-six
Section III Basic Concepts of Economics

(C) the cost of choice: the ubiquitous opportunity cost

 The scarcity of resources forces us to

make a choice. To make a choice, you

have to make some kind of sacrifice. This
kind of sacrifice or the price given up
involves the concept of opportunity cost.
 The so-called opportunity cost refers to

the maximum benefit that can be obtained

in other uses when the resource is put into
a specific use.

57
 Section IV Theoretical Framework of
Microeconomics

"For in-depth analysis, it is best to start

with the model of perfect competitive
market system from the beginning, which
is a favorite method for economists to
study how to organize economic activities
under the capitalist system" [1].

[1] Douglas greenwald: Encyclopedia of Economics, China

Social Sciences Press, 1992, p. 585.

58
de supply
shoe Product market Shoe gei
housing price Housing tea
tea leaves

Produce what? How much is produced?

family How to produce? enterprise
(consumer) For whom? (producer)

labour labour
The price in factor markets land
land (salary, interest, rent, etc.) Capital goods
Capital goods
demand

su

The competitive price system applies to the market of supply and

demand to solve the resource allocation.
question
Refer to Samuelson: Economics (6th Edition), Commercial Press, 1964, p. 39.
.
 Definition of research field

producer consumer
(enterprise) (family)
market

government

Specific research fields of economics

Section IV Theoretical Framework of
Microeconomics

 Two departments: residents and manufacturers.

 Two markets: factor market and product market.

Residents refer to consumers and manufacturers

refer to producers.
Every consumer and every manufacturer here
has a dual identity: a single consumer and a
single manufacturer appear in the product
market as demanders and suppliers of products
respectively, and appear in factor markets as
suppliers and demanders of production factors
respectively.
.
61
Section 5 the emergence and development of
western economics
First, the period of classical economics
Produced in the 1870 s

Second, the period of neoclassical economics

19 From 1970s to 1930s
age

Third, the period of modern economics

20 Since the 1930s.
62
Section VI Characteristics of China's Economic
Analysis

one
One of the important problems in

2 The second important problem of studying economi

three The third important issue of learning economics: inc

 The origin of social science analysis
As early as 1890, alfred marshall put forward that
"economics is a study of human beings".
 A deep understanding and insight into human nature is the first
consideration in system design and the starting point of social
science analysis.
 Analysis of human needs
 Analysis of human behavior
 System design regulates people's behavior.

 The arrangement of incentive mechanism should be fully reflected in the

system design
(Good people, design good systems)
 A good system regulates people's behavior.
A bad system makes good people bad.
One of the important problems in studying econ
Understanding politics: the premise of
studying economics
 political system

- Monarchy, constitutional monarchy, republic.


Democracy and legal system, political organization form, election
system, political party system, etc.
-Legislative, executive and judicial power

 The core issue of the political system

-The political system determines the arrangement of the property right

system.
-Property rights determine distribution
 The governance structure of modern
China.
1. The ruling party is in an absolute leading position in the country.
2. Administration is attached to politics, and politics has absolute control over administration.
3. Property rights belong to the state. State-owned property rights are dominant.
4. The ruling party is the actual controller of state-owned property rights.
5. Government officials at all levels do not own state property rights, but are essentially
agents of higher-level governments.
6. With the expansion of administrative level, the problem of multi-level agency appears.
7. Supervision is mainly composed of internal supervision system, and there is no effective
supervision system and external supervision system for agents.
Supervision system.
 The second important problem of studying econ
Coase (Ronald Coase, 1991 Nobel Prize in Economics) Theorem

coase theorem
- When the cost of negotiation and negotiation between the two
parties is very small, as long as the property right is clearly
defined, it doesn't matter if the property right is given to either
party of the transaction, and both parties can achieve the most
effective use of resources through negotiation.


Coase's second theorem

- Different property rights systems will lead to different resource

allocation and efficiency. property right system
It is an important endogenous variable that determines economic
efficiency. One of the important responsibilities of the
government is to define all kinds of property rights in social and
economic life as clearly as possible.
The third important issue of learning economics:

 Principal-agent problem
•
Information Asymmetry
 The core problem is: the design of incentive mechanism.
 Within the system: the incentive mechanism
in the government and state-owned
enterprises
State-owned enterprise government
 The "Regulations on the Exchange of Leading Cadres of the Party and Government"
promulgated in August 2006 clearly stipulates that cadre exchanges between party and
government organs and state-owned enterprises and institutions should be carried out,
and the leaders of state-owned enterprises and institutions should be selected and
transferred to the party and government organs.
 characteristic

 China society is actually divided into two systems: internal system and external system.

- The system consists of government and state-owned enterprises.

- Ownership of core resources within the system.
- The government and state-owned enterprises are interdependent,
forming a strict and complete system.
Incentive system.
- State-owned enterprises are the cornerstone of the ruling party.
 The development outside the system depends on the inside.

- The incentive system outside the system has a ceiling effect.

- There is a competitive relationship between economic
development outside the system and inside the system.
- Property rights protection is very important.
 Reference book:

1. Microeconomics (19th Edition) [M], [America] paul samuelson, William .Nordhaus, China Post

Electric Press, 2012.

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