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Chapter 1 Notes

Chapter 1 Notes - Kimberly Zhang Microeconomics Chapter 1...

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Kimberly Zhang Microeconomics Chapter 1 Economics is the science that deals with the allocation of limited resources to satisfy unlimited human wants Resources are said to be scarce because their supply is limited o We are constrained in the choices we can make about the good sand services we produce Microeconomics is described as the science of constrained choice o Studies economic behavior of individual economic decision makers (consumer, worker, firm, or manager) Society must answer these questions: o What goods/services will be produced, and in what quantities? o Who will produce the goods and services, and how? o Who will receive the goods and services? Exogenous variable : a variable whose value is taken as given in the analysis of an economic system (tends to be price) Endogenous variable : a variable whose value is determined within the economic system being studied Microeconomic models rely on three analytical tools o Constrained optimization
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