Chapter 01 - Introduction
Main Concepts and Learning Objectives
This chapter provides an overview of the purpose of this textbook:
to help students
develop a solid understanding of microeconomics, including both the content of
microeconomics and the tools needed to undertake microeconomic analyses.
Understanding the content of microeconomics will equip students to understand:
the major resource allocation questions that must be addressed by every society (what
to produce, how to produce these goods and services, and who should enjoy these
goods and services),
two primary strategies for addressing these questions (markets and government
policies), and the interplay between these two strategies, and
the critical difference between fact-based positive analysis and value-based normative
Microeconomic analyses are employed in businesses (customer analysis, sales
forecasting, financial planning), finance (analysis of factors that influence corporate
profits and, therefore, stock prices), and public policy design and evaluation.
may, in the future, undertake their own microeconomic analyses, or they may be
“consumers” who will base important decisions on forecasts or analyses prepared by
In either event, understanding the tools needed to conduct microeconomic
analyses will strengthen the quality of their decisions.
These tools include:
implementing the scientific method,
constructing, employing and assessing the quality of mathematical models, and
locating and using data, in conjunction with sound econometric techniques to test
This textbook will provide examples in which economists have used the first and third
It will focus on helping students to develop the second skill.
initially, believe that this tool is completely new.
However, we all use models to
structure our decision-making processes – probably on a daily basis.
are provided in this chapter.
Specifically, students who master the material presented in this chapter will be able to
provide examples of:
policy issues that involve resource allocation questions (What, How, Who).
policy controversies that focus on choices between centralized and decentralized
well-defined markets, and issues that complicate market definitions
positive and normative statements