The Themes of microeconomics a Microeconomics and Optima/ Trade-offs 1. Consumer Theory 2 Workers 3. Theory of the Firm Chapter 1: Preliminaries Slide 11
Chapter 1: Preliminaries Slide 11 The Themes of Microeconomics ◼ Microeconomics and Optimal Trade-offs 1. Consumer Theory 2. Workers 3. Theory of the Firm
The Themes of microeconomics a Microeconomics and prices o The role of prices in a market economy o How prices are determined Chapter 1: Preliminaries Slide 12
Chapter 1: Preliminaries Slide 12 The Themes of Microeconomics ◼ Microeconomics and Prices ⚫ The role of prices in a market economy ⚫ How prices are determined
Theories and models a Microeconomic Analysis o Theories are used to explain observed phenomena in terms of a set of basic rules and assumptions ● For example ◆ The Theory of the Firm e The Theory of Consumer Behavior Chapter 1: Preliminaries Slide 13
Chapter 1: Preliminaries Slide 13 Theories and Models ◼ Microeconomic Analysis ⚫ Theories are used to explain observed phenomena in terms of a set of basic rules and assumptions. ⚫ For example ◆The Theory of the Firm ◆The Theory of Consumer Behavior
Theories and models a Microeconomic Analysis o Models e a mathematical representation of a theory used to make a prediction Chapter 1: Preliminaries Slide 14
Chapter 1: Preliminaries Slide 14 Theories and Models ◼ Microeconomic Analysis ⚫ Models: ◆ a mathematical representation of a theory used to make a prediction
Theories and models a Microeconomic Analysis ● Validating a Theory The validity of a theory is determined by the quality of its prediction, given the assumptions Chapter 1: Preliminaries Slide 15
Chapter 1: Preliminaries Slide 15 Theories and Models ◼ Microeconomic Analysis ⚫ Validating a Theory ◆The validity of a theory is determined by the quality of its prediction, given the assumptions