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Unisa
Analyze your study skills
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Chapter 1
Chapter 2
Questions
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Exam Preparation and Techniques
Stress Management
Professional development of lecturers.
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 Tutorial
letter 1
 MyUnisa
 Assignments
 Important
dates
 Prescribed textbook
 Exam entry
 Questionnaire
 Different
 Analyse
 Assist
types of learners
Preliminaries
What is Microeconomics?
 Nature
and importance of microeconomics
 The workings of a market
 Real and Nominal prices
Economics
Microeconomics
Public
Economics
Macroeconomics
Monetary
Economics
Development
Economics
Finance
Economics
International
Economics
 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
 Trade-offs
 Prices
and Markets
 Theories and Models
 Positive and Normative analysis
 Nature of Markets
 Real versus Nominal prices
 Why study Economics?
Consumer
Theory
Consumers
- Limited income
- Trade-off for
maximized
well-being
Workers
- When to enter
workforce
- Work or
education?
Optimal
TradeOff
Theory of
the firm
Firms
- What to
produce?
- Resource
available
Prices
Markets
• Trade-offs
• e.g. Labour: Work for pleasure
• Centrally planned economy = Prices set
by government
• Market economy = Prices determined by
consumers, workers, firms
• Interactions to determine price
Theories =
Explanations &
Predictions
Model =
Mathematical
representation
Positive
Normative
- Central to microeconomics
- Explanations and
predictions
- Describe relationships of
cause and effect
- Go beyond explanations
and predictions
- “What is best?”
- Examine questions of what
ought to be
 Definition:




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 low @ one location & sell high
at another location
 Competitive

market
Perfectly competitive: Many buyers and sellers
e.g. agricultural markets
 Noncompetitive


Many producers
Cartel: Group of producers act collectively
 Market


market
price:
Competitive market = Single price = market price
Not perfectly competitive = Different prices

Average price = Market price
 Market

Buyers and sellers
 Extent



2.
of the market:
Determine which buyers and sellers
Boundaries of a market
Geographical and i.t.o. range of products
 Market
1.
Definition:
definition importance:
Understand who is actual and potential
competitors
Public policy decisions
 Nominal


Absolute price
“Current-dollar”
 Real


prices:
prices:
Price relative to aggregate measure of prices
“Constant-dollar”
 Consumer
Price Index
 Producer Price Index
 CETERIS



PARIBUS
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.
 PRICES


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


Behave rationally
Well off given limitations
 MALE

INDIVIDUALS
OR FEMALE?
“He” merely used for practical reasons