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Introduction To Micro Economics

This document provides an introduction to microeconomics. It discusses key topics like scarcity and choice, economic systems including market, command and mixed economies. It describes the characteristics of pure market and command economies and provides examples of capitalist, socialist and communist systems. It also introduces production possibility curves and discusses how different economic systems address the basic economic questions of what, how and for whom to produce goods and services.

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Venkatesh Gangula
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54 views21 pages

Introduction To Micro Economics

This document provides an introduction to microeconomics. It discusses key topics like scarcity and choice, economic systems including market, command and mixed economies. It describes the characteristics of pure market and command economies and provides examples of capitalist, socialist and communist systems. It also introduces production possibility curves and discusses how different economic systems address the basic economic questions of what, how and for whom to produce goods and services.

Uploaded by

Venkatesh Gangula
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Introduction to Micro economics

Introduction Nature & Scope Relevance Scarcity & choice

Science/Art
Positive/ Normative Basic questions answered by economics Economics-Micro, Macro

Importance, limitations of Micro economics

Unlimited wants Limited resources

Alternative uses
Problem of choice

Economic System Market Economy Command Economy Mixed economy

How Does An Economy Work?


Nations must answer 3 basic Economic question: What goods and services should be produced? How should the goods and services be produced? For who should the goods and services be produced? The way a nation answers these questions defines their economy

Types of Economic Systems

All economic systems fall into one of two broad categories: Market (or Capitalist) System Command (or Planned) System No economy can be purely market or purely command Elements of both economies are found in all systems this makes all economies mixed

A Pure Market Economy

No government involvement in economic decisions The government lets the people answer the three basic economic questions

What? Customers decide through their purchases


How? This is left up to the individual business BUT- a business must be profitable Who? People who have money can buy more this encourages hard work and investments

A Pure Command Economy


The Government controls the factors of production and makes all the decisions The government is responsible for answering the three economic questions What? One person ( a dictator) or a group of government officials (central planning committee) decide what is to be produced How? The government owns all the factors of production and makes all the decisions about production Who? The government decide who receives what is produced in the economy

Mixed Economies
Some government involvement through mandatory laws regulations that businesses follow Labor Laws, Minimum Wage and

The government provides social programs for those who need help Medicare, welfare
All economies are mixed they are classified based on how much the government is involved in the process

Continuum of Economic Systems

Command Economy Communism On the far left but right of communism

Socialism Left of center

Market Economy Capitalism On the far right

Capitalism
An economic system characterized by private ownership of businesses and marketplace competition The government is concerned about its people and takes care of those who cannot care for themselves The political system is a democracy with leaders elected by the people The United States and Japan are examples of a Capitalist Economy

Socialism

Increased government involvement in peoples lives and the economy The main goal is to keep prices low for all people and to provide employment for many The government runs key industries and makes economic decisions More social services for all and free or low cost medical care Canada, Germany, Sweden, Australia and Great Britain are all examples of socialist economies

Communism
The government runs everything (Totalitarian government) Only one political party, the Communist party, runs the government All people able to work are assigned jobs there is virtually no unemployment The government assigns housing, schools, and occupations There is little to no economic freedom Cuba, North Korea, and China are examples

Economies In Transition

The breakup of the Soviet Union is the best example of a country changing from a Command Economy to a Market Economy State owned industries have been privatized (government owned businesses are sold to private citizens) Today even socialist countries are selling some of their government owned businesses to individuals

Economic Systems

THE FOUR TYPES

The Four Types of Economic Systems Four very different types of Economic Systems have evolved as different societies have placed different emphasis on different goals and priorities in their efforts to answer the Three Key Economic Question.

Traditional Economy Family or Community based Economic System System that relies on custom and ritual to make its choices. Examples: Tribes Any Sustenance Economy

Individual or Consumer based Economic System that relies on the consumption choices of consumers. Examples: *The U.S.A.? *Japan? Any Capitalist Economy?

Market Economy

Command Economy Centrally Controlled Economy where the Government makes all decisions. Examples: Cuba China Any Communist Country or Dictatorship

Mixed Economy Economic System that incorporates some Governmental involvement into a Market Based Economy. Examples: *The U.S.A.? *Japan? *India? Most Modern Economies

Production Possibility Curve (PPC) Shows maximum combination of output that the economy can produce using all the available resources

Economics & Business


Business Economics: Application of

Economic theory to analyze the problems faced by a firm in the process of decision making

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