MICROECONOMICS

ADAPTED FROM:
PRINCIPLES OF ECONOMICS
(SARIMAH AMAN SHAH & ABD. RASHID MOHD SALLEH)
&
PRINCIPLES OF ECONOMICS
(DEVIGA VENGEDASALAM & KARUNAGARAN MADHAVAN)
 CHAPTER 1: INTRODUCTION TO
MICROECONOMICS

Learning outcomes:
At the end of this chapter, you should be able to understand:
 Define microeconomics
 Compare between study fields of economics: micro and macro
economics
 Describe economic concepts
 Concept of scarcity, choice and opportunity cost
 Describe the economic problems
 Describe the characteristics of world economic system
 The benefits of economic systems
 Compare how the economic system solve the basic economic
problems
 DEFINITION OF ECONOMICS

Economics is the study of how people

use limited resources to fulfill unlimited
wants, and involves alternatives.
 MICROECONOMICS VS
MACROECONOMICS

Microeconomics
Macroeconomics
•The study of individual parts
of the economy, The study of the economic system as a whole,
•such as public choices, such as national income,
•business choices and trade cycle,
•personal choices. unemployment rate,
•Example: Inflation,
•Demand growth,
•Supply general price level,
•Production cost money and banking.
•Market Structure
ECONOMIC RESOURCES
CLASSIFICATION OF GOODS
 BASIC ECONOMIC CONCEPTS

• Limited resources but unlimited wants

• Creates:
SCARCITY
 CHOICES

• Choices—exist from scarcity. People have to

make a choice from certain alternatives.

OR
 OPPORTUNITY COST

• Opportunity cost—defined as second best

alternative that has to be forgone for another
choice which gives more satisfaction
BASIC ECONOMIC PROBLEMS
ECONOMIC SYSTEMS
 SOCIALISM

Introduction
• Known as Central Economy, Communist System,
Command Economy or Planned System
• All economic decisions are made by the
government or central authority
• Examples of socialist economies: China, North
Korea, Cuba
SOCIALISM
SOCIALISM
 SOCIALISM

 Demerits
- Errors in decision-making 激励
- Lack of motivation and incentive to work
- Lack of development and R&D
- Loss of economic freedom
- Waste of economic resources
 SOCIALISM

 Solving economic problems

- What to produce?
oMore on welfare goods
- How to produce?
oProduction techniques chosen based on
social welfare
- For whom to produce?
oAll members of society
CAPITALISM
CAPITALISM
CAPITALISM
CAPITALISM
CAPITALISM
 MIXED ECONOMY

Introduction
 Combination of capitalism and socialism
 Examples of mixed economies: Malaysia,
Singapore, India
 MIXED ECONOMY

• Characteristics
- Public and private ownership of resources
- Price mechanism and economic plans to make
economic decisions
- Government helps to control disparity 差距
- Government intervention in the economy
 MIXED ECONOMY

• Merits 安置
- Efficient allocation of resources
- More choices
- Co-operation between government and private
sector in making economic decisions
- Control of monopolies
- Economic stability
 MIXED ECONOMY

 Demerits
- Conflicts of interest in producing goods
- Negative external influences
 MIXED ECONOMY

 Solving economic problems

- What to produce?
oDetermined by price mechanism
oWelfare and private goods
- How to produce?
oProduction methods based on social
benefit and social costs
- For whom to produce?
oDetermined by price mechanism through
taxation and subsidy policy
 ISLAMIC ECONOMY

Introduction
 Based on Al-Quran and Al-Hadith
 Economic decisions based more on maslahah
 Emphasizes happiness on earth and afterlife
Characteristics
• Public and private ownership of resources owned
by God
• Price mechanism and limited government
intervention
• Distribution of wealth
• Prohibition of interest
• Freedom of economic enterprise
 ISLAMIC ECONOMY

• Merits
- Ensures social welfare
- Avoid riba and monopolies
- Equal distribution of wealth and income
- Freedom of ownership of resources
 ISLAMIC ECONOMY

 Solving economic problems

- What to produce
oFree to produce subject to Islamic laws
- How to produce?
oMaximize production and minimize cost
- For whom to produce?
oBased on purchasing power and individual
income