Page | 1
ECON 3020: INTERMEDIATE MICROECONOMICS HUSSAIN, FALL 2008
CHAPTER 1: INTRODUCTION
This set of notes covers topics from Chapter 1 of the textbook, pages 1-9. You must read these
notes in conjunction with Chapter 1. This chapter provides an introduction to some of the most
important concepts and definitions that will be covered in detain in this class.
WHAT IS ECONOMICS?
Every society has scarce resources and we have to use these limited resources to meet different
goals. Economics is the study of how to use limited resources efficiently for the achievement of
alternative ends.
The three most important questions facing any society are:
•
What to produce – Should we produce more guns or more butter? Society faces a trade-off,
producing more guns means producing less butter.
•
How to produce – Should we use more labor or more capital? Producers have to switch
between different production techniques and input combinations, always looking for the
cheapest production technology.
•
Who gets what is produced – Who gets to consume what is produced – more for one means
less for someone else.
MICROECONOMICS AND MACROECONOMICS:
Microeconomics is the study of how an individual decision maker, e.g. an individual consumer
or a firm, uses scarce resources to maximize his/her personal benefits. Benefits can be thought of
as measured by units of satisfaction for a consumer or dollar profits for a firm. Macroeconomics,
on the other hand, is the study of the economy as a whole.
