Principles of Micro Economics Lecture 1
I always wanted to understand economics basis, after looking at 2008 market crash and watching subsequent movies related to that , which try to explain the whole thing, led me to think I need to understand more of Economics. I stumbled upon a MIT course - Principles of Microeconomics.
I will be going through lectures in subsequent posts.
Microeconomics is study of how individual and firms make decision in world of scarcity. They do contrained optimizations by making tradeoffs. But behind tradeoffs there is an opportunity costs.
Supply and Demand Model
Adam Smith - Father of economics
Paul Samuelson - Father of modern economics
The Supply and Demand model was brought by Adam Smith. It brings up 2 important analysis -
- Positive analysis is study of what things are.
- Nomalitive analysis is what things should be.
Example of normalitive question - should we be allowed to sell kidneys on an online auction ?
Adam Smith also mentions in his book the concept of “an invisible hand”, which is a capatalist market will have competition and hence innovate and provide goods that are best for consumer.