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Summary Introduction to micro econmics
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this document summarizes the topic on micro economics and is specially prepared for the first year economics students
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INTRODUCTION TO MICROECONOMICS• Module Outline
1. Consumer Behaviour
2. Producer Behaviour
3. Pricing with Market Power
4. Labour Market
1. Consumer Behaviour
, • The consumer behaviour is best understood in three distinct steps:
1. Consumer Preferences
2. Budget Constraints
3. Consumer Choices
These three steps are the basics of consumer theory
Market Baskets
• We use the term market basket to refer to such a group of items
• Specifically, a market basket is a list with specific quantities of one or
more goods
• A market basket might contain the various food items in a grocery cart
• It might also refer to the quantities of food, clothing, and housing that a
consumer buys each month.
• Many economists also use the word bundle to mean the same thing as
market basket.
• How do consumers select market baskets?
• How do they decide, for example, how much food versus clothing to buy
each month?
• Although selections may occasionally be arbitrary, as we will soon see,
consumers usually select market baskets that make them as well off as
possible.
• Table 1 shows several market baskets consisting of various amounts of
food and clothing purchased on a monthly basis.
• The number of food items can be measured in any number of ways: by
total number of containers, by number of packages of each item (e.g.,
milk, meat, etc.), or by number of pounds or grams.
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