Lecture "Macro economic: Chapter 1" provides students with the knowledge: Economic concept and economic systems, the market Forces of Supply and Demand, the theory of consumer choice, the Costs of production, competitive Markets Firms print,... You are invited the same reference.
Lecturer: LƯƠNG MỸ THÙY DƯƠNG
Topic 1: Economic concept and Economic systems Topic 2: The Market Forces of Supply and Demand Topic 3: The Theory of Consumer Choice Topic 4: The Costs of Production Topic 5: Firms in Competitive Markets Topic 6: Monopoly Topic 7: Monopolistic Competition and Oligopoly
© McGraw-Hill Book Company Australia, 1999
PPS t/a Economics for Business 2/e 1-2
1-Economics for Business – Lan Fraser – John
Glonea – Simon Fraser.
2-Economics – Paul A. Samuelson and William D.
Nordhaus.
3-Kinh tế Vi mô - Trường Đại học Công nghiệp
TP.HCM
4-Kinh tế Vi mô - Trường Đại học Kinh tế TP.HCM. 5-Nguyên lý kinh tế học – David Begg.
• Economic concept. • Basic Economic Problems. • Economic Systems.
Is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.
• Resources are scarce in relation to the
unlimited needs and wants of consumers.
• Also called Factors of Production • All inputs which are used in the production
and distribution of goods and services.
production.
Examples- Business managers
• Scarce • Have alternative uses • Quantity of a resource varies • Quality of a resource varies
• A simplified economic model which portrays
scarcity, choice and opportunity cost.
PPF
400-
E
300-
D
200-
s r o t c a r T
C
100-
B
200
400
800
600 Video Recorders
A
• The PPF shows the maximum output of the
economy.
• If the economy devoted all of its resources to the production of VCRs it is able to produce 800 (+ zero tractors) - Production Possibility A.
• Alternatively, if the economy chooses Production Possibility C it is able to produce 200 tractors and 400 VCRs.
The sacrifice in choosing to satisfy one need or want rather than another (the alternative forgone).
• The PPF shows that to produce more of one product means producing less of another.
• Opportunity costs of production can be
measured eg if the economy moves from point C to D (along the PPF) it will produce an extra 100 tractors BUT 200 VCR’s must be sacrificed.
• Hence the opportunity cost is 200 VCR’s.
• Points outside the PPF (eg X) are not
A
possible using existing technology and resources.
PPF
B
• At point Y, the economy is satisfying fewer needs and wants than is possible.
• This is due to:
– Resources not being fully employed and/or – Resources not being
used in the most efficient way.
• This model differs from the static PPF in that it incorporates changes over time.
• It demonstrates the effect of changes in the
quantity and quality of productive resources eg new resource discoveries, improvements in technology.
• Changes in the quantity and/or quality of
resources will SHIFT the PPF.
• When the
quality/quantity of resources increases (decreases), the economy can produce more (less) of both products and the entire curve will SHIFT outwards (inwards).
• If the change in resources affects ONLY one product, the PPF will ONLY shift on one axis eg: A
OR
• -Positive Economics is descriptive – a
relating of facts and circumstance based upon observation. -Normative Economics is prescriptive – a relating of solution and action based upon ethics and value judgment
• The way a nation is organised to respond to
the problem of scarcity
• Different economic systems use different methods to answer the Basic Economic Questions is – 1. What to produce – 2. How to produce – 3. For whom to produce
• Also called Capitalist or Private Enterprise
systems.
• The invisible hand.
Features are:
• Productive resources are predominantly
owned by the private sector
• Economic decision making is decentralised in the level of government intervention is low
• Economic motivation is self interest
(utility or profit)
• Allocation by price • Efficiency is valued
• Also called Socialist or Centrally
Planned Economies.
• Productive resources are owned predominantly by the state or government sector
• Economic decision making is
undertaken by a central authority or government
• Collective welfare in goods/services are distributed to benefit the state as a whole, rather than individuals
• Allocation by non-price
mechanisms
• Equity is valued
• All modern economies are said to be a
mixture of
- market forces and - government intervention • In the past, major examples of centrally planned economies were the former USSR and China. These now have allowed levels of market forces to operate
• Advantages of market systems
– eg: economic freedom, efficiency etc .Disadvantages of market systems – eg: unequal distribution of income and wealth
External diseconomies rise, Monopoly, insufficient
public goods, business cycles . • Advantages of command systems
– eg: Equity
• Disadvantages of command systems
– eg: inefficiencies and waste, Slow economic growth
• Examples: Poland, East Germany,
Russia, Czech republic
• Rapid price and trade liberalisation
– immediate opening of markets – privatisation of most state owned
enterprises
– reform of tax, legal and financial system
Country
Russia United States of America Germany French Japan
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