1. 1 Microeconomics Esa Unggul University

2. 2 Introduction Why study economics? Why you want to study economics? Does an economist get higher salary? What do you know about microeconomics?

3. 3 Economic activities Traditional  modern economy Simple  complicated activities few  more people involved Economic agents Producers Consumers Traders – small  big: retailer  wholesaler Governments - local  central government

4. 4 Economic activities Economist simplify real world economic activities by modeling the behavior of economic agents. Modeling  impose assumptions –Agents: Producers & Consumers –Ceteris paribus –Optimization –Positive-normative distinction

5. 5 History of economics Early economic thought  why do a commodity have value?  theory of value Difference between value (use) and price (exchange) Water and diamond paradox Labor theory approach  cost of producing Marginalist approach  the usefulness of last unit consumed Marshallian supply-demand

6. 6 Partial and General Equilibrium Partial  one market at a time General  link one market to other market Simple case  Production possibility frontier Concept of opportunity cost

7. 7 Welfare economics & Modern Developments Welfare economics –Answer normative questions –Concept: economic efficiency Modern economics –Mathematical foundations –New tools: game theory, monopolistic pricing models –Economic Uncertainty and information

8. 8 microeconomics focus on the behaviour of – consumer and producer – competitive market The theories that explain consumer in maximising its utility and the producer in maximising its profit

9. 9 Reading list Walter Nicholson, Microeconomic Theory, Basic Principles and Extensions, 9th Edition, Thomson, South-Western, 2005 (WN1) Hal R. Varian, Microeconomic Analysis, 3rd Edition, W.W Norton & Company, 1992, New York. (HV) Andreu Mas-Colell, Michael D Whinston and Jerry R. Green, Microeconomic Theory, Oxford University Press, New York1995 (AMC) Binger, Brian R, and Hoffman Elisabeth “Microeconomics with Calculus” Scott, Foresman, and Company, 1988 (BBHE) Pindyck Robert S dan Daniel L. Rubinfeld, “Microeconomics”, Sixth Edition, Prentice Hall, 2005. (P&R) Henderson, James M dan Quandt, “Microeconomic Theory: A Mathematical Approach”, McGraw-Hill, 1980