1. INTRODUCTION TO
MICROECONOMIC
Definition
- A study of how people use their limited resources to
fulfill unlimited wants
- A science that studies human behavior as a relationship
between ends and scarce means which have alternative
( L.Robbins )
- A study of how people use their limited resources to try
fulfill unlimited wants and involves alternatives or choices
- As a study how scarce as a study of how scarce
resources are allocated among alternative uses

2. Microeconomics - Studies individual economic
units
- The study of individual parts of
the economy such as public
choices, business choice and
personal choices
Macroeconomics - Studies the aggregate behaviour
of the entire economy
- The study of the economics
system as whole such as the
national income, the trade cycle,
the unemployment rate, inflation
and general price levels

3. Basic Economics Concepts
 Scarcity
- Wants always exceeds limited resources to
satisfy clients/society
 Choice
- When there is scarcity, choice have to be made
- Everyone cannot have what he @ she wants, so they
must choose from the available alternatives
 Opportunity Cost
- Second best alternative that has to be forgone for
another choice which gives more satisfaction

4. Factors of Production
 Labour - People in the production process that
involve both mental & physical effort
 Capital - Machinery , raw material, building, tools
 Land - Natural resources ( land, air, water, forest
etc )
 Entrepreneur – Human ability & capability to
combine land, labour & capital to develop
production of goods & services

5. Production Possibilities Curve
( PPC )
Definition
 Used to explain the basic economic
concepts of scarcity, choice and
opportunity cost
 Show the various possible combinations of
goods and services produced within a
specified time with given technology and
resources

6.  3 Specifics assumptions to illustrate the
PPC
- The economy only produces two
goods ( eg: food & clothing )
- The economy achieves full efficiency
- Economic resources are fixed in
quantity and quality
- The level of technology is fixed and
unchanging

7. Production Possibilities Sewing Machine Butter
A 15 0
B 14 1
C 12 2
D 9 3
E 5 4
F 0 5

8.  Point A to E
- The best possible combination of resources to
enable full utilization and to ensure that the country
is at full employment
 Any point inside the PPC ( Y )
- These combinations of production are attainable
- Possible to produce butter and sewing machines of
this quantity
- It shows waste of resources and inefficiency since
the production has not reached its maximum level
- Leads to unemployment

9.  Any point outside the PPC ( Z )
- Scarcity ( wants exceed output )
- Limited resources and technology
-point PPC are unattainable
 Any point along the PPC ( A to F )
- Choice
- It will choose : both attainable & efficient
 Movement from one point to another ( point C to D )
- Opportunity cost

10. Basic Economic Problems
 What to Produce
Every society must choose the type & the quantity of
goods & services that it will produce
 How to Produce
Refers to the cheapest method of production
( Traditional Vs Robotics / Workers Vs Machine )
 For Whom to Produce
Refers to distribution. Distribution of economic benefits
depend on the distribution income
 How Much to Produce
A producer must identify the quantity of DD in the market
( DD increase : Production of good increase )