Microeconomics
Chapter 1- Nature and Method of Economics
Key Concepts
The key to understanding Chapter 1 is the understanding of economic terms. It is important to realize that we may use terms in this class a little differently than in other classes such as Finance. A perfect example is Investment. In a Finance class an investment would be a stock or a bond. In Economics an investment is the purchase of a newly created real capital asset.
It is also important to understand the common pitfalls of studying economics. The same type of experiments done in the Chemistry lab cannot be accomplished in economics.
Finally, the appendix is critical to the successful completion of the class. The ability to read graphs, tables and charts is necessary for this class.
Chapter 2- The Economizing Problem
The key to Chapter two is the Production Possibilities Curve (PPC). To understand the reasoning behind its shape we need to understand the assumptions that help simplify the analysis. You will find that we frequently use assumptions to make the initial analysis simpler. A key term in understanding the reasoning behind the shape of the PPC is the Law of Increasing Opportunity Cost. The circular flow an important diagram.
Chapter 3-Individual Markets
Chapter 3 introduces Supply and Demand. The Law of Supply and the Law of Demand are critical concepts to understand. These concepts give the demand and supply curves their downward and upward sloping shapes. It is also critical to understand the difference between a change in demand (supply) and a change in quantity demanded (supplied). A change in demand (supply) is caused by a change in one of the determinants of demand (table 3.4) or supply (table 3.7) changing. A change in quantity demand (supplied) is caused by a change in its own price and is represented by a movement along the curve.
Chapter 4 The Market System
All economies must decide how to allocate scarce resources. All economies need to answer four questions. 1. What to Produce? 2. How to produce the output? 3. Who will obtain the output? 4. How will The system accommodate change? Our market economy answers these questions efficiently.
Chapter 5 The US Economy
Chapter 5 takes a look at the 3 major sectors of the US economy. The public sector, the household sector and the business sector. It is important to understand the interrelationships between the sectors as described in the circular flow. It is also important to understand the basic advantages and disadvantages of proprietorships, partnerships and corporations. We will cover in the second part of the class the various industry structures.
Chapter 20 Supply and Demand
Chapter 20 is continuation of chapter 3's discussion of supply and demand. The calculation of elasticities is covered in this chapter. The student will be expected to know how to calculate the elasticities (price elasticity of demand, price elasticity of supply, cross elasticity of demand, income elasticity of demand) and the interpretation. The student will be expected to understand the relationship between the price elasticity of a good and total revenue.
Chapter 21 Consumer Behavior Including the Appendix
Chapter 21 takes a look at how you and I as consumers make the decisions that we make. The chapter discusses how consumers work to maximize utility and the implication that this has for our demand curve. The appendix provides a more advanced look at consumer behavior using what we call indifference curve analysis. From my perspective this is a more user friendly way to look at consumer behavior. It does not require that we determine the marginal and total utility for each good.