INTRODUCTION TO MICROECONOMICS

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INTRODUCTION TO MICROECONOMICS by Mind Map: INTRODUCTION TO MICROECONOMICS

1. FEATURES

2. MERITS

2.1. -Decisions of allocation of resources always are in the interests of society as a whole and with specific national goals. - Unemployment could be largely avoided if the government carefully planned the allocation of labour. - Same income distribution - Produces the goods and services at efficiency level.

3. Business freedom is not totally offered for enterprise.

4. NECESSITY GOODS

4.1. GOODS WHICH ARE ESSENTIAL TO CONSUMERS DAILY NEEDS.EXAMPLE,FOODSTUFFS

5. CONSUMPTION OF FREE GOODS INVOLVES NO SACRIFICE AND NO OPPORTUNITY COST.THESE GOODS ARE NOT CREATED FROM SCARCE RESOURCES.IN CONTRAST,THESE ARE NATURALLY OCCURING GOODS THAT ARE UNLIMITED IN SUPPLY AND THUS NO PRICE IS CHARGED FOR THESE GOODS.

6. DEMERITS

7. ARE UNIQUE AND HAVE FEELINGS

7.1. WAGES

8. Economy which uses Allah's creation natural resources with most efficient and fair way based on Islamic laws

9. - Mistake decide in economy (decision made by some people only) - Technology and innovation are undeveloped because all productions are decided by government

10. THE OVERALL STUDY OF A COUNTRY'S ECONOMIC ACTIVITIES

11. RR

12. Centrally planned or command economy / socialist economy

13. -Existence of wide gap between the rich and the poor. - Existence of unemployment problem.

14. GENERALLY,A PRODUCER PRODUCER PRODUCES A GOOD FOR PEOPLE WHO CAN AFFORD THE COST OF THE GOOD.THIS MEANS THAT PEOPLE WITH A HIGHER INCOME WILL BE ABLE TO AFFORD MORE GOODS,WHILE PEOPLE WITH A LOWER INCOME CAN AFFORD FEWER GOODS.TO ENSURE THAT SOCIETY AS A WHOLE CAN AFFORD GOODS THAT ARE PRODUCED,THE GOVERNMENT SHOULD INTRODUCE A FAIR DISTRIBUTION SYSTEM.

15. -Al Quran and Hadith was the main source in Islamic economics’ activities. - Individual free to own property - individual no give priority to profit in business - fair competition permitted - free to decide in economics

16. This system use market mechanism and allow government intervention in economy activities. - Price level determine by price’s mechanism but basic economy’s problem resolved together between government and private. - Individual and firm free to have properties

17. ECONOMY DEFINED AS A RESEARCH ON HOW SOCIETY UTILIZES LIMITED RESOURCES TO SATISFY THEIR UNLIMITED WANTS

17.1. HOUSEHOLDS

17.2. FIRMS

17.2.1. USES THE GOODS AND SERVICES

17.3. GOVERNMENT

18. ENTREPRENEUR

18.1. AN ENTREPRENEUR IS A PERSON WITH THE SKILLS AND ABILITY TO ORGANIZE PRODUCTION AND BEAR RISKS.

18.1.1. PROFIT

19. CAPITAL

19.1. CAPITAL CONNSISTS OF ASSETS SUCH AS EQUIPMENT,MMACHINERY AND RAW MATERIALS

20. LABOUR

20.1. LABOURERS

20.1.1. MAY BE SKILLED OR UNSKILLED

20.1.2. CAN BE MOVED FROM ONE LOCATION TO ANOTHER

20.2. LABOUR IS PHYSICAL AND INTELLECTUAL SERVICES PROVIDED BY MAN

21. MICROECONOMICS

21.1. THE STUDY OF SMALL ECONOMIC UNITS,e.g.INDIVIDUALS,FIRMS

22. MACROECONOMICS

23. ECONOMIC RESOURCES

23.1. LAND

23.1.1. THE SUPPLY OF LAND IS INHERENTLY FIXED IN LOCATION AND GEOGRAPHY

23.1.1.1. RENT

23.1.2. MINERALS,OIL DEPOSITS

23.1.3. THE VALUE OF LAND IS DEPENDENT ON QUALITY AND LOCATION

24. TYPES OF GOODS

24.1. ECONOMIC GOODS

24.1.1. CREATED FROM SCARCE RESOURCES,TGHEREBY THESE GOODS HAVE OPPORTUNITY COST,ARE LIMITED IN SUPPLY.AND ARE SCARCE IN RELATION TO DEMAND .THESE GOODS ALSO INVOLVE PRICE AND OPPORTUNITY PRICE.

24.2. FREE GOODS

24.3. PRIVATE GOODS

24.3.1. GOODS AND SERVICES OWNED BY HOUSEHOLDS.THESE GOODS CANNOT BE USED WITHOUT WITHOUT PERMISSION FROM THE OWNER.

24.4. PUBLIC GOODS

24.4.1. PUBLIC GOODS ARE PROVIDED BY THE GOVERNMENT.THESE GOODS ARE NON-EXCLUDABLE,i.e.NOBODY CAN BE PREVENTED,EXEMPTED OR BARRED FROM USING THEM.PUBLIC GOODS ARE ALSO NON-EXHAUSTIBLE,i.e.CONSUMPTION BY ONE PERSON WILL NOT REDUCE THE AVAILABILITY TO OTHERS.EXAMPLE ;TRAFFIC LIGHTS AND STREET LIGHTING

24.5. INFERIOR GOODS

24.6. GIFFEN GOODS

24.6.1. GOODS FOR WHICH DEMAND GOES UP WITH THE RISE IN PRICE.EXAMPLE,WHEAT,LOW QUALITY RICE,FROZEN FOOD

24.7. NORMAL GOODS

24.7.1. GOODS USED BY CONSUMERS IN ORDER TO MAKE THEIR LIVES COMFORTABLE.GOODS FOR WHICH DEMAND RISES AS INCOME RISES.EXAMPLE,TABLECHAIRS,RADIOS

24.8. LUXURY GOODS

24.9. MERIT GOODS

24.9.1. GOODS FOR WHICH THE CONSUMPTION IS DEEMED TO BE INTRINSICALLY DESIRABLE IF THE CONSUMERS ARE UNWILLING TO PURCHASE SUCH GOODS,i.e.PEOPLE CAN BE EXCLUDED FROM CONSUMING THESE GOODS.EXAMPLE,STATE EDUCATION,PUBLIC HEALTH CARE

24.9.1.1. GOODS FOR WHICH DEMAND DECREASES WHEN THE INCOME OF A CONSUMER INCREASES BEYOND A CERTAIN LEVEL.EXAMPLE,PUBLIC TRANSPORT,SECOND-HAND CARS

25. CONCEPT OF MICROECONOMIC PROBLEMS

25.1. SCARCITY

25.1.1. WANTS WHICH ARE ALWAYS EXCEEDING LIMITED RESOURCES MEANT TO SATISFY THEM.PROBLEMS OF SCARCITY OCCUR WHEN GOODS AND SERVICES ARE LIMITED COMPARED TO MAN

25.2. PROBLEMS OF CHOICE

25.2.1. SINCE THERE ARE NOT ENOUGH AVAILABLE RESOURCES TO SATISFY THE WANTS OF INDIVIDUALS AND SOCIETIES,INDIVIDULAS AND SOCIETIES MUST MAKE CHOICES AMONG COMPETING ALTERNATIVES.

25.3. OPPORTUNITY COST

25.3.1. OPPORTUNITY COST IS THE COST OF ONE CHOICE IN TERMS OF THE BESTFORGONE ALTERNATIVE.IF YOUCANNOT OBTAIN WHAT YOU NEED,THEN YOU HAVE TO CHOOSE AMONG THE ALTERNATIVES.

26. BASIC ECONOMIC PROBLEMS

26.1. WHAT MIX OF GOODS AND SERVICES WILL BE PRODUCED?

26.2. HOW MUCH GOODS AND SERVICES SHOULD BE PRODUCED?

26.2.1. TO OVERCOME THIS BASIC ECONOMIC PROBLEM,A PRODUCER MUST IDENTIFY THE QUANTITY OF DEMAND IN THE MARKET .IF THERE IS A HIGH DEMAND FOR A PARTICULAR GOOD THE PRODUCER WILL INCREASE PRODUCTION OF THE GOOD.IF THERE IS A LOW DEMAND,THE PRODUCER MUST DECREASE THE PRODUCTION.

26.2.1.1. THERE ARE INSUFFICIENT AVAILABLE ECONOMIC RESOURCE TO FULFIL MAN'S UNLIMITED WANTS.THEREFORE,SOCIETY MUST CHOOSE THE GOODS THAT WILL BE PRODUCED AND THE GOODS THAT MUST BE FORGONE AT CERTAIN TIME

26.3. HOW IS OUTPUT PRODUCED ?

26.3.1. IF THE COST OF LABOUR IS LESS THAN THE COST OF CAPITAL,THE PRODUCER SELECTS THE LABOUR-INTENSIVE PRODUCTION METHOD.IF THE COST OF CAPITAL IS LESS THAN HE COST OF LABOUR,THE PRODUCER OPTS FOR CAPITAL-INTENSIVE PRODUCTION

26.4. FOR WHOM SHOULD THE PRODUCT BE PRODUCED ?

27. Free market economy / capitalist / laissez faire

27.1. Is an economy system was operation without government intervention

27.2. FEAUTRES

27.2.1. -Decisions are taken by individual and firm with no government intervention. - It usually associated with a pure capitalist, where land and capital are privately owned. - The price mechanism used in this system whereby changes in price in response to change in demand and supply have the effect of making demand equal to supply.

27.3. MERITS

27.3.1. - Individual are free to make their own economic choice - Freedom to workers and firm to choose where to work and what production methods to use.

27.4. DEMERITS

28. Centrally planned or command economy / socialist economy

28.1. DEMERITS

28.2. - Decision are taken by the government or central authorities - It usually associated with a socialist or communist economy system, where land and capital are collectively owned. The government or central authorities plan the allocation of resources.

29. Mixed economy

29.1. Is a economy system that incorporates a mixture of private and government ownership or control ( capitalism and socialist)

29.2. FEATURES

29.3. MERITS

29.3.1. - The government will try to reduce gap of income between rich and poor people. ( taxes and subsidies) - Government will also control the existence of monopolies

30. Islamic economy

30.1. FEATURES

30.2. MERITS

30.2.1. Good in the world and afterworld - Free competition