BUSI1007

Introduction to
Microeconomics and
Accounting

BROAD COURSE OUTLINE

Economics of production and industry organization
Costs of production: Total, average, variable, fixed, marginal,
economies of scale, Economic versus accounting profit ,
Forms of business organizations
Market structures:
Market structures: Perfect competition, Monopoly, Price
discrimination, Oligopoly and Monopolistic competition,
Introduction to game theory
Time Value of money
Capital Investment analysis
Introduction to Macroeconomics
Introduction to macroeconomics, National income, GDP,
Consumer price index, The tax system and public policy

MATH SKILLS FOR INTRODUCTORY

ECONOMICS

Mathematics plays an important part in

economics and serves, as a basic
means of
explaining and analyzing
behaviour in an economy.

MATH REVIEW LEARNING OUTCOME

Identify different points on a graph using
coordinates.
Identify the point of intersection between two
lines on a graph.
Determine points of tangency on a straight line
and use them to calculate the slope of the curve.
Determine whether a straight line (or portion of a
curve) has a positive, negative, or zero slope.
Identify maximum and minimum points of a
curve

MATH SKILLS FOR INTRODUCTORY

ECONOMICS

1. Graph Basics

THE CARTESIAN PLANE IS DIVIDED INTO FOUR

QUADRANTS.
y

Cartesian Plane
Formed by
intersecting two
real number
lines at right
angles. Divides
space into 4
quadrants

II

III

IV

POINTS AND THEIR COORDINATES

y

Cartesian Plane
Horizontal line =
X axis

y axis

Vertical line =
Y axis

origin

x axis
9

PLOTTING POINTS IN THE CARTESIAN PLANE

y

1. Begin at origin
2. Use ordered pair
(coordinates) to
draw point (x,Y)
e.g. (5,6)
3. (5, 6) is an
example of an
ordered pair 5 is
the X coordinate
and 6 is the Y
coordinate

(5,6)
6

11

PLOTTING THE POINT (-3, 4)

y
up 4

( 3, 4)

( 3, 4)
x
left 3
12

PLOT THE FOLLOWING POINTS.

y

A( 4, 6)
B(2, 3)

A( 4,
6)A

A( 4, 6)

C( 6, 4)

D(7, 3)
D(7, 3)

D(7, 3)

These points all lie in

different quadrants.

C( 6, 4)

B(2, 3)
B(2, 3)
13

PLOT THE FOLLOWING POINTS.

y

E(5, 0)
F(0, 6)

F(0, 6)

G( 7, 0)
H(0, 3)

E(5, 0)

H(0, 3)
These points all lie on the
axes, not in quadrants.

14

GRAPH BASICS - QUICK REVIEW

What point is on the yaxis?
What point is labeled
(20,60)?
What point(s) have a ycoordinate of 30?
What point has the
largest x- coordinate
value?

VARIABLES
In economics, measurable characteristics such
as prices, outputs, income, etc., are measured
by numerical values.
Since these values can vary we call these
characteristics "variables.
We express a relationship between two
variables, X and Y, by stating the following for
example:
The value of the variable Y depends upon
the value of the variable X.

VARIABLES
For example, the total price you pay for a
particular sized pizza (Y) depends upon the
number of toppings (X) you order.
We can write the relationship between
variables in an equation for a straight line
like this:

Y = a + bX
If we know that X and Y represent
variables, then what are a and b?

(a and b) are
CONSTANTS in (Y = a+bX)

a and b are constants. They are fixed

values which specify how X relates to Y. In
our pizza example, "a" is the price of a
plain pizza with no toppings and "b" is the
cost of each topping.
A graph of this particular relationship
between X and Y, will show all the
combinations of X and Y that fit the
equation. When plotted, the result is a
straight line graph

VARIABLES
If plain pizza (a) is $50.00 and the cost of each
topping (b) is $10, then given
Y = a + (b)(X) we get the following table:
Final cost = plain pizza + topping cost X # of toppings
$ 50
$ 60
$ 70
$ 80
$ 90
$100

$50
$50
$50
$50
$50
$50

$10
$10
$10
$10
$10
$10

0
1
2
3
4
5

GRAPH - COST OF PIZZA

Cost of Pizza with Toppings
100
90
80
70
60
(1,60)
50
Final Cost
(0,50) 40
30
20
10
0
0
2

(5,100)
(4,90)
(3,80)
(2,70)

Number of toppings

10

12

COMPONENTS OF GENERAL EQUATION FOR

STRAIGHT LINE
variable

variable

y=a+bx
Y intercept

slope

Pizza: y = 50+10x

SLOPE (Gradient or Rise over Run)

The slope of a curve is used to tell us how
much one variable (y) changes in relation to
the change in another variable (x). This can be
written as follows:

Slope = Y/ X
Slope =

Vertical axis
in Horizontal Axis

The slope tells us how much the cost of a pizza

changes as the number of toppings changes.

WHAT IS THE SLOPE OF THIS LINE?

D
C

3
2
1

SLOPE = 1/10

X=30, Y=3

B
A
X=10, y=1

10

20

30

X
40

COMPONENTS OF GENERAL EQUATION FOR

STRAIGHT LINE
variable

variable

y=a+bx
Y intercept

slope

Pizza: y = 50+10x

SLOPE
Examples:

Y = 20+30x
y intercept is 20
slope is 30
y = 4 10x
y intercept is 4
slope is (-10)
Y = 1.3x + 1/2y
y intercept is?
slope is?

SLOPE OF PIZZA GRAPH

Cost of Pizza with Toppings
100
90
80
70
60
(1,60)
50
Final(0,50)
Cost
40
30
20
10
0
0
2

B
A

(5,100)
(4,90)
(3,80)
(2,70)

Y=50+10(X)
4

Number of toppings

10

12

FINDING THE EQUATION OF A

STRAIGHT LINE
We need to find the values of a and
b to substitute into the formula
y = a + bx
the point at which
Finding a is easy
the line crosses the
y axis

b is the slope the

=
difference between
any 2 points on the line

(value of y)

The change in y
The change in x

FINDING THE EQUATION OF A LINE

9

We can simply read

off the value of b

8
7

a=3

6
5
4
3

change in y
b = The
The change in x

2
1
-8 7 6

5 4 3

2 1

3 4

7 8

x
b=

y = 2x +3

2
or
1

b=2

8
4

THE SLOPE
Slope can be positive or negative
y

b = 2/3

3
-2

b=3

-3

y
x
1

x
3

b=-3
b = - 2/3

CALCULATING SLOPE OF LINE FROM THE COORDINATES

OF TWO POINTS ON THE LINE

Example:
B
A
Let's say that points (8, 15) and (7, 10) are on
a straight line. What is the slope of this line?
The change in y = 10 -15 = -5
The change in x = 7 - 8 = - 1
Put them together:
Change in y

-5

change in x

Therefore slope = -5 / -1 = 5

-1

ACTIVE LEARNING: Finding Equation of a Straight Line

Joining (2, 3) & (-1, -3)

Find the gradient

and intercept of
the lines ..
Joining (2, 3) & (-1, -3)
Joining (-4, -1) & (4, 1)
Joining (-1, 4) & (2, -2)

Hence write
down the
equations for
each line

PICTORIAL REPRESENTATION OF THE SLOPE OF

A LINE: POSITIVE, NEGATIVE, INFINITE OR ZERO
Positive
Slope

Zero
Slope

Infinity
Slope

Negative
Slope
Y

IDENTIFYING THE INTERSECTION OF TWO

straight LINES
Represents More than
one relationship
between the X and Y
variables.

the two lines have the

same (x, y) values
simultaneously at
point B the point of
intersection

SLOPE OF NONLINEAR RELATIONSHIPS

We usually
calculate the
slope of a
curve at just
one point.
Why?
Because the
slope of the
curve changes
as you move
along it.

SLOPE OF NONLINEAR RELATIONSHIPS

To measure slope, we
introduce the concept of
a tangent.
A straight line that
touches a non linear
curve at a point
The point where the
tangent line just touches
the curve is called the
point of tangency.

SLOPE AT A POINT ON A NON LINEAR CURVE

4
3

Y=2

X=X=30
10

20

30

40

SLOPE OF NONLINEAR RELATIONSHIPS

20

Y=

15
10

A
-10

X=
25

50

75

100

DIRECT RELATIONSHIP BETWEEN TWO

VARIABLES?

When one variable increases,

the other increases or when
one variable decreases the
other decreases

EXPENDITURE FOR PERSONAL COMPUTER

AT DIFFERENT ANNUAL INCOMES
Personal
Expenditure

$1,000
$2,000
$3,000
$4,000

Annual
Income

$10,000
$20,000
$30,000
$40,000
Direct Relationship

GRAPH OF DIRECT RELATIONSHIP

Y
4

3
2

X=10 Y=1

1
0

10

20

30

40

INVERSE RELATIONSHIP BETWEEN TWO

VARIABLES?

When one variable increases,

the other decreases or when
one variable decreases the
other in

QUANTITY OF COMPACT DISCS CONSUMERS

PURCHASED AT DIFFERENT PRICES
Price per
compact disc

$20
$15
$10
$5

Quantity of
compact discs

25,000,000
50,000,000
75,000,000
100,000,000
Inverse Relationship

GRAPH OF INVERSE RELATIONSHIP

20
B

15
10

Y=20

X=25

X
25

50

75

100

INDEPENDENT RELATIONSHIP BETWEEN TWO VARIABLES?

When one variable changes, the

other variable remains unchanged

EXPENDITURE FOR TOOTHPASTE

AT DIFFERENT ANNUAL INCOMES
Personal
Expenditure

$20
$20
$20
$20

Annual
Income

$10,000
$20,000
$30,000
$40,000

Independent Relationship

GRAPH OF INDEPENDENT RELATIONSHIP

Y
40
30
A

20

X=10
Y=0

10
10

20

30

X
40

MAXIMUM POINT ON A CURVE

A maximum point
is the point on the
curve with the
highest
y-coordinate value
and a slope of
zero.
What point is
maximum?

MINIMUM POINT ON A CURVE

A minimum
point is the point
on the curve with
the lowest ycoordinate value
and a slope of
zero
What point is
minimum?

GENERAL QUESTIONS

What is a direct relationship between two

variables?
What is the slope of a line?
What is an inverse relationship between two
variables?
What is an independent relationship between
two variables?
Can slope vary along a curve?

MATH REVIEW LEARNING OUTCOME

Identify different points on a graph using
coordinates.
Match a graph of a straight line with the
appropriate equation.
Match an equation of a straight line with the
appropriate graph.
Calculate the slope of a straight line
a.
from the equation
b.
from two points
c.
from the graph
Determine whether the slope of a straight line is
positive, negative, zero, or infinite.