1. MICROECONOMICS ECS201
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2. WHAT ARE WE DOING TODAY? Who am I? What to do and not to do
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Chapter 2
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4. Adc services Delivering academic support regarding: Time Management
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5. To do or not to do … Prepare Pre-requisite Participation Homework
Tardiness
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6. Means of communication
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12. Preliminaries What is Microeconomics?
Chapter 1
Preliminaries
What is Microeconomics?

13. Outcomes Nature and importance of microeconomics
The workings of a market
Real and Nominal prices

14. International Economics
Microeconomics
Macroeconomics
Public Economics
Monetary
Economics
Finance
Economics
Development
Economics
International Economics

15. WHAT IS MICROECONOMICS?
Equips us to answer questions
Explain irregularity in our everyday lives
Provide the background for other economic disciplines
Knowledge of basic economic theory
Application of basic economic theory
Gain insight in social and economic events
WHY?
Help us predict what is likely to happen
Make sense of solutions to answer questions on economic events. SA and other countries.

16. THEMES of microeconomics
Trade-offs
Prices and Markets
Theories and Models
Positive and Normative analysis
Nature of Markets
Real versus Nominal prices
Why study Economics?

17. THEMES of microeconomics - Trade-offs
Consumer Theory
Optimal Trade-Off
Consumers
- Limited income
- Trade-off for maximized
well-being
Workers
- When to enter workforce
- Work or education?
Firms
- What to produce?
- Resource available
Theory of the firm

18. Prices Markets Prices and Markets Trade-offs
e.g. Labour: Work for pleasure
Centrally planned economy = Prices set by government
Market economy = Prices determined by consumers, workers, firms
Prices
Interactions to determine price
Markets

19. LIMITED RESOURCES Theories = Explanations & Predictions
THEORIES AND MODELS
Theories = Explanations & Predictions
Model = Mathematical representation

20. POSITIVE AND NORMATIVE ANALYSIS
LIMITED RESOURCES
POSITIVE AND NORMATIVE ANALYSIS
Positive
- Central to microeconomics
- Explanations and predictions
- Describe relationships of cause and effect
Normative
- Go beyond explanations and predictions
- “What is best?”
- Examine questions of what ought to be

21. MARKET Definition: Market = More than an industry
Collection of buyers and sellers
Through actual or potential interactions
Determine price of a product
Or, set of products
Market = More than an industry
Industry: Collection of firms that sell same/closely related products.
Potential interactions & actual interactions
Arbitrage:
Significant difference in price of commodity
Practice of buying one location & sell high at another location

22. MARKET Competitive market Noncompetitive market Market price:
Perfectly competitive: Many buyers and sellers e.g. agricultural markets
Noncompetitive market
Many producers
Cartel: Group of producers act collectively
Market price:
Competitive market = Single price = market price
Not perfectly competitive = Different prices
Average price = Market price

23. MARKET Market Definition: Extent of the market:
Buyers and sellers
Extent of the market:
Determine which buyers and sellers
Boundaries of a market
Geographical and i.t.o. range of products
Market definition importance:
Understand who is actual and potential competitors
Public policy decisions

24. REAL VS NOMINAL PRICES Nominal prices: Real prices:
Absolute price
“Current-dollar”
Real prices:
Price relative to aggregate measure of prices
“Constant-dollar”
Consumer Price Index
Producer Price Index

25. IMPOTANT CONCEPTS IMPORTANT CONCEPTS CETERIS PARIBUS EQUILIBRIUM
Assumption used when designing models.
Meaning: All variables other than the one economist use will remain unchanged.
Latin expression: “All other things being equal”
EQUILIBRIUM
Important in economic theory
A situation, once it has been reached, tends to persist
All factors in balance.

26. IMPOTANT CONCEPTS IMPORTANT CONCEPTS PRICES RATIONAL INDIVIDUALS
MACRO = Absolute prices i.e. price of goods and services
MICRO = Relative prices i.e. relationship between price in question and price of other products
RATIONAL INDIVIDUALS
Behave rationally
Well off given limitations
MALE OR FEMALE?
“He” merely used for practical reasons