ECON 1900
Principles of
Microeconomics
TOPIC 1.1: WHAT IS
ECONOMICS?
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What is Economics?
Economics is about decision making.
By studying economics, you'll gain a deep
understanding of how individuals,
businesses, and governments make
decisions.
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What type of
decisions
involve
economics?
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A definition of economics
The social science concerned with how individuals,
institutions, and society make best choices under conditions
of scarcity.
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Scarcity & Choice
1. Most decisions involve scarcity
and choice
2. What is scarce?
3. Scarcity → Choice
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In economics, we say these 4
categories of resources are scarce
Land
• Real estate, forests, water, minerals, etc.
Labour
• Quantity & quality of labour
• Includes education, experience, skillsets
Capital
• Physical capital
• Used for production
Entrepreneurship
• A human characteristic
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The concept of Opportunity
cost
The concept of opportunity cost: the next best alternative foregone.
What is the opportunity cost of attending this class today?
Illustrates that there is no free lunch!
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How does economics apply to
your personal decisions?
Unlimited
wants
(humans want
lots!)
Scarcity
Choice
($, time)
(opportunity cost)
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Microeconomics
looks at specific
economic units
Microeconomics
vs.
Macroeconomics
Macroeconomics
examines the
economy as a whole
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Practice: for each headline, state
whether it is microeconomics or
macroeconomics?
P
1.
The total revenue of Ford Motor
Company have risen over the past 2
years. - Micro
2.
The unemployment rate remains low at
the beginning of 2023. - Macro
3.
The price of gasoline continues to be
volatile. - Macro
4.
There is a shortage of Taylor Swift
concert tickets. - Micro
5.
Inflation rates are relatively high. Macro
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Economics topics can be
categorized as positive or
normative
Positive economics describes the economy as
it actually is.
Normative economics involves value
judgments about what the economy should be
like and the desirability of the policy.
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Practice:
for each statement, is it
normative or positive?
1.
The unemployment rate is 5.2%. - positive
2.
The government should spend more on alleviating climate change.
- normative
3.
The unemployment rate is lowest in Manitoba. - positive
4.
The price of Taylor Swift concert tickets are too high. - normative
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Analyze data
Analytical
tools
What are
some skills
you will gain
from studying
economics?
Critical
thinking
Problemsolving
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finance,
policy,
international
trade,
research
Navigate
complex
issues such
as climate
change,
inequality,
the impact
of AI, etc
Make
informed
decisions
Propose
solutions
to realworld
challenges
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Economics uses models
In economics, models are used to illustrate how an aspect of the
economy works.
 an economic model is a simplified version of the real world
Why a simplified version?
 The real world is messy, so models have simplifying assumptions.
Models allow us to observe, understand and make predictions
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Key concepts
1. Scarcity, Choice
2. Resources
3. Opportunity Cost
4. Micro vs Macroeconomics
5. Normative vs Positive economics
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