Chapter 1 - Analyzing economic problems. This chapter presents the following content: Defining Microeconomics, who should study microeconomics? Microeconomic modeling, the types of microeconomic analysis. | CHAPTER 1 1 Analyzing Economic Problems Copyright (c)2014 John Wiley & Sons, Inc. 1 2 Chapter One Chapter One Overview Defining Microeconomics Who Should Study Microeconomics? Microeconomic Modeling Elements of Models Solving the Models The Types of Microeconomic Analysis Copyright (c)2014 John Wiley & Sons, Inc. 3 Microeconomics Defined Microeconomics is the study of how individual economic decision-makers such as consumers, workers, firms or managers allocate scarce resources among alternate uses. This study involves both the behavior of these economic agents on their own and the way their behavior interacts to form larger units, such as markets. Chapter One Copyright (c)2014 John Wiley & Sons, Inc. 4 Policy Makers Managers Union Leaders Lenders Business Owners Who Should Study Microeconomics? Chapter One Copyright (c)2014 John Wiley & Sons, Inc. 5 Key Societal Questions Societies must answer these questions that relate to microeconomics: What goods and services will be produced and | CHAPTER 1 1 Analyzing Economic Problems Copyright (c)2014 John Wiley & Sons, Inc. 1 2 Chapter One Chapter One Overview Defining Microeconomics Who Should Study Microeconomics? Microeconomic Modeling Elements of Models Solving the Models The Types of Microeconomic Analysis Copyright (c)2014 John Wiley & Sons, Inc. 3 Microeconomics Defined Microeconomics is the study of how individual economic decision-makers such as consumers, workers, firms or managers allocate scarce resources among alternate uses. This study involves both the behavior of these economic agents on their own and the way their behavior interacts to form larger units, such as markets. Chapter One Copyright (c)2014 John Wiley & Sons, Inc. 4 Policy Makers Managers Union Leaders Lenders Business Owners Who Should Study Microeconomics? Chapter One Copyright (c)2014 John Wiley & Sons, Inc. 5 Key Societal Questions Societies must answer these questions that relate to microeconomics: What goods and services will be produced and in what quantities Who will produces these services and how will they produce them Who will receive these goods and services and how will they get them Chapter One Copyright (c)2014 John Wiley & Sons, Inc. 6 Microeconomic Modeling Choice vs. Alternatives Resemble Reality Be Understandable Be an Appropriate Scale Models are like maps – using visual methods, they simply the process and facilitate understanding of complex concepts. Microeconomic models need to: Chapter One Copyright (c)2014 John Wiley & Sons, Inc. 7 Exogenous & Endogenous Variables Variables that have values taken as given in the analysis are exogenous variables. Variables that have values determined as a result of the model’s workings are endogenous variables. Defined: “How would a manager hire the most possible workers on a budget of $100?” vs. “How would a manager minimize the cost of hiring three workers?” OR “How much food and clothing should the consumer purchase in order to maximize satisfaction on a budget of I?”
