INTRODUCTION TO MICROECONOMICS


Written records of human existence suggest that obtaining the material means to satisfy wants has been a perpetual problem. Food and shelter are requirements of human life. Other goods satisfy a range of human desires and give pleasure or utility to individuals. The study of ways that humans deal with these problems of provisioning is called “economics.”

The evolution of processes to solve the provisioning problem takes place in a social context. As a result, the economy is a subsystem and is interrelated with a variety of other social subsystems. These subsystems include (but are not limited to) economic, political, religious, social, geographic, demographic, legal, and moral systems. The psychology of individuals is also fundamental to the social system. From the time of the Greeks (e.g. Xenophon [430-355 BCE], Plato [427-347 BCE] and Aristotle [384-322 BCE]) through the Classical economists (e.g. Adam Smith [1723-1791], Thomas Malthus [1766-1834] and David Ricardo [1772-1823]), economics was treated as part of philosophy, religion and/or moral philosophy.

During the 19th century, social science emerged and separate disciplines were carved out. Economics, psychology, sociology, politics, anthropology and other branches of social science developed as separate fields of study. In the last part of the 19th century, “political economy” became “economics.” Since that time, economics has been frequently defined as “the study of how scarce resources are allocated to satisfy unlimited wants.” As a professional discipline, economics is often regarded as a decision science that seeks optimal solutions to technical allocation problems. In this text, economics is presented from two perspectives. First, the process of provisioning will be presented. The second perspective is the technical analysis of the processes
by which scarce resources are allocated for competing ends.