KINH TẾ VI MÔ Chapter 1 introduction

PRINCIPLES OF
MICROECONOMICS
NGUYEN THI MINH THU


¢ Instructor:
¢ Office:

Nguyen Thi Minh Thu

Faculty of International
Nguyen Thi Minh Thu, FIE, FTU

Economics, 2nd floor, Building B.
¢ Email

address:


¢ Phone

number: 0902172177
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TEXTBOOKS
¢  Mankiw,

Principles of Microeconomics (5th edition),

South Western CENGAGE Learning.

Nguyen Thi Minh Thu, FIE, FTU

¢  Krugman,

Wells, Microeconomics (3rd edition), Worth

Publishers.
¢  Pyndick,

Rubinfeld, Microeconomics (6th edition),

Pearson Education International.

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4 DON’TS
¢ BE

LATE
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¢ CHAT
¢ SLEEP
¢ USE

PHONE

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4 DOs
¢  Study

textbooks before class.

¢  Actively
¢  Do

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¢  Read

Applied Math

participate class activities

home works

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TOPICS IN MICROECONOMICS
ü 

ü 
ü 
ü 
ü 

NGUYEN Thi Minh Thu, FIE

ü 

Introduction to Microeconomics
Demand and Supply
Consumer Behavior
Producer Behavior
Market Structures
Labor Market
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QUESTION
¢  Suppose

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that you and your friends is going to
hold a junior prom.
¢  100 students is going to attend for sure
¢  According to your calculation, each will have to
pay 200,000 VND to cover payment for food
(150,000 VND each) and music band as well as
the hall.
¢  One hour before the prom, one classmate says he
wants to attend but just has 180,000 VND.
¢  What is your decision?
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CHAPTER 1: PRELIMINARIES
THEMES OF MICROECONOMICS

2. 

ANALYSIS METHODS

3. 

WHY STUDY MICROECONOMICS

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1. 

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THEMES OF MICROECONOMICS

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THEMES OF MICROECONOMICS
¢ 

An economy consists of at least 3 kinds of

Households,

Firms,

Government.
¢  Households:

Consumers & Owners of

production factors
¢  Firms:

factors

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agents:

Producers & Users of production
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THEMES OF MICROECONOMICS
¢  Two

types of markets: Market for

commodities.
¢  Should

Firms always be sellers?

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production factor and Market for

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THEMES OF MICROECONOMICS
¢  Can

firms always produce whatever they want to

¢  Can

consumers always get goods and services

that they desire?
¢  Can

Government always satisfy society s needs?

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produce?

è The problem of scarcity

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THEMES OF MICROECONOMICS
¢ Scarcity

is the state of being short of

unlimited wants)

è Economics is the study how society
deals with scarcity.
¢ Two

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resources (limited resources vs.

major branches: Microeconomics

and Macroeconomics

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THEMES OF MICRECONOMICS

is a branch of

economics that deals with the behavior
of these individual economic units as

well as the markets that these units

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è M icroeconomics

comprise.
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THEMES OF MICRECONOMICS

branch of economics that deals with
aggregate economic variables, such as the
level and

growth rate of national output,

interest rates, unemployment,
inflation.

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On the other hand, macroeconomics is a

and
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THEMES OF MICROECONOMICS

Microeconomics describes how prices are determined.

are set by the government.
- In a market economy, prices are determined by the
interactions of consumers and firms. These interactions
occur in markets—collections of buyers and sellers that

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- In a centrally planned/command economy, prices

together determine the price of a good.
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ANALYSIS METHODS OF
MICROECONOMICS

¢  Marginal

thinking

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¢  Modeling

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MODELING
¢  An

economic model is a simplified representation

¢  Basic

assumption: Ceteris Paribus

¢  Others:

Prefer more to less, perfect information,

etc.
¢  Assumed

goals

- 

Consumers: Utility maximization

- 

Producers: Profit maximization

- 

Government: Efficiency vs. Equality

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of reality explaining how the economy works.

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THE ECONOMY

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MARGINAL THINKING
¢  Rational

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people think at the margin
¢  Cost – Benefit analysis

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EXAMPLE
¢  Suppose

500,000 VND
c. 100,000 VND
a. 

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you are given a free ticket of Quang
Dung live concert.
¢  At the same time, Dam Vinh Hung also holds a
show, for which you are willing to pay 500,000
VND. The market price for DVH show ticket is
400,000 VND.
¢  If you choose QD, do you incur any cost?
b. 400,000 VND
d. 0 VND

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MARGINAL THINKING
¢ Total

cost includes opportunity cost
cost is the value of the

second best option that you forgo.

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¢ Opportunity

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MARGINAL THINKING
¢ Total

benefit is the money value of

¢ Net

benefit is the difference

between total benefit and total cost.
¢ NB

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what you gain.

= TB – TC
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MARGINAL THINKING
¢  Marginal

cost is the change in total cost resulting

¢  If

ΔTC
MC =
ΔQ

the total cost is continuous

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from the production of an extra unit of product.

MC = TC (Q)
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€