Microeconomics II : first meeting - Introduction

Lecturer : . MrSamsubar Saleh

Microeconomics focus on individual behaviour. The purpose of microeconomics is optimalization, either to maximize or to minimize. for examples : cost should be minimize, profit should be maximize etc. Why it should be maximize or minimize because there is scarcity and scarcity or lack of resources makes goods or services have a price. Price comes from market mechanism. Price come from from producer and consumer behaviour.

 Structur of Production

There are two sector of production, houshold and firm.

Household provide factors of produtction  such as labor, Capital, land and skils. the Firm is a user of  factors of production. from that factors of production houshold get wage or salaries for labor, interest rate or revenue sharing or devidend for capital, rent for land and profit for skills. we can ilustrate the relation between household and firm.

in this case do you think that the role of state/goverment is needed ?

The role of government is needed because there is market failure. reason of market failure :
- asymetric information between producer  and consumer.
- There is exteralities.
- There is monopoly. monopoly is bad because the price is higher than marginal cost.
- Public goods. charatheristic of public goods : collectively and nonexclusive
- etc