ECN 201: Principles of Microeconomics
Nusrat Jahan
Lecture-1
Important Concepts in Microeconomics
What is Economics?
Economics studies how scares resources can be efficiently used to achieve maximum
satisfaction of human needs.
There are two branches of Economics1. Macroeconomics
Concerned with the overall performance of
either the economy as a whole or its basic
aggregates.
2. Microeconomics
Concerned with the performance of individual
units such as a person, a household, a firm or
an industry.
Economics can also be classified in two other branches
Positive Economics: Positive economics focuses on facts and cause-and-effect
relationships. It describes the facts of an economy that is, what the economy is actually
like e.g. minimum wage increases unemployment.
Normative Economics: Normative economics involves value judgments about what the
economy should be like e.g. minimum wage should raised.
Production Possibilities Frontier and Opportunity Cost
Opportunity Cost: The opportunity cost of an item is what you give up to get that
item.
Production Possibilities Frontier: A graph that shows the various combinations of
output that the economy can possibly produce given the available factors of
production and the available production technology that firms can use to turn these
factors into output.
Food
0
1
2
3
4
5
Clothing
50
40
30
20
10
0