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Summary Microeconomics
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ECS2601 BMZ ASSESSMENT 4 SEMESTER 2 2024 MASTER In a perfectly competitive industry, the amount of output that a rm decides to sell has no effect on the market price, because… a. the rm’s output...
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ECS3708 ASSESSMENT 2 SEMESTER 1 2024
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📈Week 1: Introduction, markets,
prices (CH 1)
Created @October 30, 2022 4:58 PM
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1.1 The themes of microeconomics
What is Microeconomics?
The branch of economics that concerns itself with the behaviour of individual
economic entities - customers, companies, workers etc - and the markets
comprised of these entities
What is macroeconomics?
The branch of economics concerned with gross domestic variables such as national
growth, interest percentages, unemployment and inflation.
It further describes the trade offs that can be made and how they can be best made.
Micro describes the trade offs that customers, workers and companies make. 3
examples
1. Consumers have limited income. The choices they make can include spending
their money instantly, spending it in the future
2. Workers generally make a choice between studying longer or entering the
workforce earlier. They also make a choice between work and leisure time.
Week 1: Introduction, markets, prices (CH 1) 1
, 3. Companies only have a limited budget at their disposal. Consequently they
have to make decisions about where to spend their money.
Why is price another important aspect of Microeconomics?
Price is the outcome of interactions between consumers, workers and companies.
What is the difference between a theory and a model?
A model is a mathematical projection of an entity based on an economic theory.
Statistics and econometrics can be used to evaluate the accuracy. Whilst a model is
a theoretical construct representing economic processes by a set of variables and a
set of logical and/or quantitative relationships
What is positive analysis?
A positive statement is one in which cause and effect can be evaluated. They are
not always correct but can be proven.
What is normative analysis?
A normative statement is concerned with the question as to what is best. Value
based judgement
What is a market?
A collection of buyers and sellers that, through their potential or actual interactions,
determine the price of a product or set of products
What is an industry?
An industry comprises of a collection of companies that make the same or similar
products
Why is market definition important?
It allows us to clarify which buyers, sellers and products belong to a given market.
Large differences create potential arbitrage
What is arbitrage?
Buying a good at a low rate at one place and selling it a higher rate at another
place.
What constitutes a perfectly competitive market?
Week 1: Introduction, markets, prices (CH 1) 2
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