Introduction to Microeconomics:
Concepts and Methodology
Introduction
Definition of Economics
Economics is the study of managing society's scarce resources.
Microeconomics focuses on the individual parts of the economy, such as
how households and firms make decisions and how they interact in
specific markets.
Micro vs. Macroeconomics
Macroeconomics looks at the economy as a whole, examining economy-
wide phenomena such as inflation and unemployment.
The circular flow diagram illustrates the interactions between
households, firms, and the government in the economy.
Research Methods
Positive statements describe the world as it is, known as descriptive
analysis.
Normative statements prescribe how the world should be, known as
prescriptive analysis.
Optimal Choice
Marginal Benefits and Marginal Costs
Marginal benefits (MB) is the change in the total benefits of a change in
the number of goods or services.
Marginal cost (MC) is the change in total cost when there is a change
in the number of goods or services.
Choosing the Optimal Option
The optimal choice is to choose option A if the marginal benefit of A
(MBA) is greater than the marginal cost of A (MCA).
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