DPB1023

MICROECONOMICS
PRINCIPLES OF ECONOMICS Third Edition
Oxford Fajar Sdn. Bhd. (008974-T), 2013

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COURSE LEARNING OUTCOME

NO

LEARNING OUTCOME

Apply effectively the knowledge of basic theories in the world

of microeconomics

Use the knowledge of microeconomics theories to solve the

business problems

Explain clearly the impact of economic changes towards

market equilibrium

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

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COURSE CONTENT
NO
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COURSE CONTENT
INTRODUCTION TO MICROECONOMICS
THE DEMAND AND SUPPLY THEORY
PRICE ELASTICITY OF DEMAND AND SUPPLY

MARKET EQUILIBRIUM
PRODUCTION THEORY
PRODUCTION COST
DETERMINANT OF OUTPUT LEVEL AND MARKET PRICE
STRUCTURE

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

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ASSESSMENT

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

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CHAPTER

INTRODUCTION TO
MICROECONOMICS

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

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DEFINITION OF ECONOMICS

Economics is a science which studies human

behaviours as a relationship between ends
and scarce which have alternative uses.
OR
Economics is a study of how people use their
limited resources to try to fulfil unlimited
wants and involves alternatives or choices.

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

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MICROECONOMICS
VS. MACROECONOMICS

MICROECONOMICS

MACROECONOMICS

The study of
individual parts of the
economy, such as
public choices,
business choices and
personal choices.

The study of the

economic system as
a whole, such as
national income,
trade cycle,
unemployment rate,
inflation and general
price level.

PRINCIPLES OF ECONOMICS Third Edition

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BASIC ECONOMIC PROBLEMS

1. WHAT TO PRODUCE?
Refers to the type of goods and services to be produced

2. HOW TO PRODUCE?
Refers to the cheapest method of production

3. FOR WHOM TO PRODUCE?

Refers to the distribution of income

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

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BASIC ECONOMIC CONCEPTS

SCARCITY

CHOICE
BASIC ECONOMIC
CONCEPTS

OPPORTUNITY COST

PRINCIPLES OF ECONOMICS Third Edition

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BASIC ECONOMIC CONCEPTS

SCARCITY
One of the important concepts in economics is
scarcity.
Scarcity is defined as wants always exceed limited
resources to satisfy them.
Scarcity is a universal problem faced by poor as well
as rich nations in order to fulfill their needs.

PRINCIPLES OF ECONOMICS Third Edition

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BASIC ECONOMIC CONCEPTS

(cont.)

CHOICE
When scarcity exists, choices are to be made.

OPPORTUNITY COST
Opportunity cost is defined as the second best
alternative that has to be forgone for another choice
which gives more satisfaction.

PRINCIPLES OF ECONOMICS Third Edition

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PRODUCTION POSSIBILITIES
CURVE (PPC)

Used to explain the basic economic concepts:

Scarcity, Choices and Opportunity cost.

DEFINITION:
The PPC shows the various possible
combinations of goods and services
produced within a specified time period
with all its resources fully and
efficiently employed.
PRINCIPLES OF ECONOMICS Third Edition
Oxford Fajar Sdn. Bhd. (008974-T), 2013

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PRODUCTION POSSIBILITIES
CURVE (PPC) (cont.)
Assumptions:
There are only two types of goods
2. Factors of production cannot be further
increased
1.

Level of technology is fixed or stagnant

4. The economy has achieved maximum
efficiency (full employment)
3.

PRINCIPLES OF ECONOMICS Third Edition

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PRODUCTION POSSIBILITIES
CURVE (PPC) (cont.)
Sewing Machine
16

If it allocates all its resources to sewing machine, it

will produce at Point A.

If it allocates all its resources to butter, it will

produce at Point F.

14

The country Jaya, produces two products

butter and sewing machine.

12
10

If the country Jaya is at Point C

on the PPC, it can produce the
combination of 2,000 kg butter
and 12,000 units of sewing
machine.

Point D shows the production of

3,000 kg butter and 9,000 units
of sewing machine.

4
2
0

F
1

PRINCIPLES OF ECONOMICS Third Edition

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Butter
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PRODUCTION POSSIBILITIES
CURVE (PPC) (cont.)
Sewing Machine
16
14
12

Z
B
Y

10
8
6
4
2
0

Point outside the PPC

(Point Z) SCARCITY

UNATTAINABLE

Any point along the PPC

CHOICES

Movement from one point

to another (point C to D)
OPPORTUNITY COST

ATTAINABLE
Point inside the PPC
(Point Y) Waste
of resources and
inefficiency

F
1

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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FACTORS THAT INFLUENCE

THE SHIFT OF PPC
Sewing Machine

1. Economic
Growth

16
When the country
enjoys economic
growth, the PPC
bounds outward.

14

12
10
8

6
4
2
0

When the country

is struck by natural
disasters, economic
growth will decline
and the PPC will
shift to the left.

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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FACTORS THAT INFLUENCE

THE SHIFT OF PPC (cont.)
Sewing Machine

2. Improvements
in Technology 16
Technology increases the
production of sewing machine.

14
12

Technology increases the

production of butter.

10
8
6
4
2
0

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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FACTORS THAT INFLUENCE

THE SHIFT OF PPC (cont.)
Sewing Machine

3. Population
16
14

Increase in
population

12
10
8
6

Decrease in
population

4
2
0

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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SHAPE OF PPC
Sewing Machine

PPC IS CONCAVE

16
14

Increasing Opportunity Cost

12
10
8
6
4
2
0

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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SHAPE OF PPC (cont.)

Sewing Machine
16

PPC IS CONVEX

14
12

Decreasing Opportunity Cost

10
8
6
4
2
0

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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SHAPE OF PPC (cont.)

Sewing Machine
16

PPC IS LINEAR

14
12

Constant Opportunity Cost

10
8
6
4
2
0

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

Butter
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ACITIVITY

According to the group, please collect

information(Merits and Demerits) and present
the following Economic Systems
i) Free Market Economy (Capitalism)
ii) Centrally Planned Economy (Socialism)
iii) Mixed Economy
iv) Islamic Economy

PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

All Rights Reserved

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PRINCIPLES OF ECONOMICS Third Edition

Oxford Fajar Sdn. Bhd. (008974-T), 2013

All Rights Reserved

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