Intermediate Microeconomics Lecture Notes
Lectures
On
Intermediate
Microeconomics
Kotut c Samwel, M. Phil (Economics)
Moi University.
Chapter one
1.0 Introduction
Economics is the science of scarce resource allocation to meet endless human desires. The modern economics science has two major branches i.e. Micro-economics and Macro-economics. Compared to micro-economics Macro-economics is a younger branch of economics. Until the economic depression of 1930s economics was limited to what is currently Micro-economics.
1.1 Economic Models;
Economic theory aims at the construction of models which describe the economic behavior of individual economic units;- consumers, firms, government agencies and their interactions hence creating the economic systems of a region, country or the world at large.
An economic model is a simplified representation of the real world/ situation. It includes the main features of the real situation which it represents. It implies an abstract of the reality that is achieved by a set of meaningful and consistent assumptions, which aim at simplification of the phenomenon or behavioral pattern which the model is designed to study. The series of assumptions in any particular case are chosen carefully so as to be ;-
Consistent to each other
Retain as much realism as possible
And finally attain a reasonable degree of generality.
A model can be constructed at different levels of aggregation, detailed and sophistication depending on its purpose. There are two purpose for which a model is constructed;- Analysis and prediction.
Analysis implies the explanation of the behavior of economic units. From a set of assumptions we derive certain laws which describe and explain with an adequate degree of generality the behavior of consumers and producers.
Prediction implies the possibility of forecasting the effects of changes in some magnitudes in an economy. For example a model of demand may be used to predict
On
Intermediate
Microeconomics
Kotut c Samwel, M. Phil (Economics)
Moi University.
Chapter one
1.0 Introduction
Economics is the science of scarce resource allocation to meet endless human desires. The modern economics science has two major branches i.e. Micro-economics and Macro-economics. Compared to micro-economics Macro-economics is a younger branch of economics. Until the economic depression of 1930s economics was limited to what is currently Micro-economics.
1.1 Economic Models;
Economic theory aims at the construction of models which describe the economic behavior of individual economic units;- consumers, firms, government agencies and their interactions hence creating the economic systems of a region, country or the world at large.
An economic model is a simplified representation of the real world/ situation. It includes the main features of the real situation which it represents. It implies an abstract of the reality that is achieved by a set of meaningful and consistent assumptions, which aim at simplification of the phenomenon or behavioral pattern which the model is designed to study. The series of assumptions in any particular case are chosen carefully so as to be ;-
Consistent to each other
Retain as much realism as possible
And finally attain a reasonable degree of generality.
A model can be constructed at different levels of aggregation, detailed and sophistication depending on its purpose. There are two purpose for which a model is constructed;- Analysis and prediction.
Analysis implies the explanation of the behavior of economic units. From a set of assumptions we derive certain laws which describe and explain with an adequate degree of generality the behavior of consumers and producers.
Prediction implies the possibility of forecasting the effects of changes in some magnitudes in an economy. For example a model of demand may be used to predict