Introduction to

Microeconomics
By Shahrat Farsim Chowdhury
  The science of scarcity, the science of how
What is individuals and societies deal with the fact that
Economics wants are greater than the limited resources
available to satisfy wants.
What is microeconomics about?

 Microeconomics is the branch of economics that deals with

the study of economic behavior of a unit.

A unit can be
 An individual
A firm or a market
 Basically microeconomics is the study of
Consumer and Producer.

They are the 2 basic components of

Basics microeconomics.

The consumer demand for goods, producer

supply goods.
Microeconomics are interested in answering the
following questions

How does a market work?

What level of output does a firm produces?
What price does a firm charge for the goods that it produces?
How does a consumer determine how much of a good he/she will
buy?
Can govt. policy affect business behavior?
Can govt. policy affect consumer behavior?
  Principle 1: People face trade-offs
How people  Principle 2: The cost of something is what you
make give up to get it
decisions?  Principle 3: Rational people think at the margin
 Principle 4: People respond to incentives
  Principle 5: Trade can make everyone better off
 Principle 6: Markets are good way to organize
How people economic activity
interact?  Principle 7: Govt. can sometimes improve
market outcomes
  Principle 8: A country’s standard of living depends on
its ability to produce goods and services
How the  Principle 9: Prices rise when govt. prints too much
economy as a money
 Principle 10: Society faces a short run trade-off
whole works? between inflation and unemployment
 Scarcity
Efficiency
Equality
Opportunity cost
Concepts we Rational people
have learned Marginal change
Incentives
Externality
Inflation
Business cycle
 Economists compare two
variables to see how a
change in one variable
affects the other variable.
400
Income Consump Point
(X) tion (Y)
350
Tk. 0 Tk. 60 A
300 100 120 B
Two variable 200 180 C
diagrams 250
300 240 D
200 400 300 E
500 500 F
150

100

50

0
0 100 200 300 400 500 600
  It is important to know how variables are related and
HOW MUCH one variable changes as the other variable
changes.
 The slope is the ratio of the change in the variable on
Slope of a line  
vertical axis to the change in the variable of horizontal
axis.
 Slope=
 Slope of a line is constant.