ECON1210 Lecture Note.docx - ECON1210 Introduction to...

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ECON1210 Introduction to Microeconomics Lecture Notes Lecture 1 Introduction A rational individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs o Should I do activity x? o C(x) = the costs of doing x o B(x) = the benefits of doing x o If B(x) ≥ C(x), do x; otherwise don't. Inference, Prediction and Policy o For rational individuals, actions are chosen to maximize some goals, subject to their respective constraints. o Prediction : Knowing a decision-maker’s goal and constraint, we can predict. Decision-makers: firms, consumers, … o Inference : By observing their choice of actions, we can guess the goals and constraints facing them. o Policy : If we can change their goals (preference), and/or constraints, we can cause them to choose a different action. Modelling the complex world o We need a model to understand, predict, infer and make policies.
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