What Is Microeconomics?

Microeconomics is the study of the choices made by individuals and firms in resource allocation and market interactions.

Individual Decision-Making

This section explores how individuals make decisions to satisfy their needs and wants when faced with the constraints of limited resources.

Firm Behavior

This section examines how firms make decisions regarding production and resource allocation within the framework of limited resources.

Market Interactions

Market interactions encompass the behaviors and relationships among consumers and producers that determine the allocation of resources based on demand and supply.

Basic Economic Problem: Scarcity And Choice

This section explores the fundamental economic problem of scarcity and the resulting choices individuals and societies must make.

Opportunity Cost

Opportunity cost refers to the next best alternative that is forgone when making a decision, which is crucial for understanding choices in microeconomics.

Demand

Demand refers to the quantity of a good or service consumers are willing and able to purchase at various prices.

Definition

Microeconomics examines the economic behaviors of individuals and firms, shaping decisions on resource allocation, supply, and demand.

Law Of Demand

The Law of Demand illustrates the inverse relationship between price and the quantity demanded of a good or service, highlighting how price changes impact consumer purchasing behavior.

Factors Affecting Demand

This section discusses the various factors that influence consumer demand for goods and services.

Demand Curve

The demand curve illustrates the relationship between the price of a good and the quantity demanded by consumers, highlighting the law of demand.

Supply

This section explores the concept of supply in microeconomics, detailing how producers determine the quantity of goods and services available in the market based on various factors.

Definition

Microeconomics studies individual and firm decision-making regarding resource allocation.

Law Of Supply

The Law of Supply states that as the price of a good increases, the quantity supplied also increases.

Factors Affecting Supply

This section examines the various factors influencing the supply of goods and services in microeconomics.

Supply Curve

The supply curve graphically represents the relationship between the price of a good and the quantity supplied by producers.

Market Equilibrium

Market equilibrium occurs when the quantity demanded equals the quantity supplied at a certain price.

Equilibrium Price And Quantity

This section outlines the concepts of equilibrium price and quantity in a market, discussing how demand and supply interact.

Disequilibrium

This section discusses disequilibrium in markets, focusing on conditions such as surplus and shortage, and how market forces restore equilibrium.

Elasticity Of Demand And Supply

This section explores the concepts of elasticity of demand and supply, detailing how quantity demanded or supplied changes in response to price adjustments.

Price Elasticity Of Demand (Ped)

Price Elasticity of Demand (PED) measures how the quantity demanded of a good responds to price changes.

Price Elasticity Of Supply (Pes)

Price Elasticity of Supply (PES) measures how responsive the quantity supplied of a good is to a change in its price.

Market Structures

Market structures categorize industries based on competition levels, impacting pricing and production strategies.

Perfect Competition

Perfect competition is a market structure characterized by many buyers and sellers, with homogeneous products and free entry and exit.

Monopoly

Monopoly is a market structure characterized by a single seller dominating the market, with barriers to entry preventing competition.

Monopolistic Competition

Monopolistic competition is characterized by many sellers in a market with differentiated products, where each seller has some control over pricing.

Oligopoly

Oligopoly is a market structure characterized by a few large firms that dominate the market, exhibiting interdependent decision-making and high barriers to entry.

Role Of The Government In Microeconomics

This section explores the critical ways in which government actions impact microeconomic activities.

Externalities

Externalities are the unintended side effects of consumers' or producers' actions on third parties, which can be either positive or negative.

Positive Externalities

Positive externalities are benefits that accrue to third parties as a result of an economic transaction, reflecting situations where social benefits exceed private benefits.

Negative Externalities

Negative externalities occur when the actions of consumers or producers impose costs on third parties.

Consumer And Producer Surplus

Consumer and producer surplus are key concepts in microeconomics that measure the benefits consumers and producers receive from market transactions.

Consumer Surplus

Consumer surplus measures the benefit consumers receive when they pay less for a product than what they are willing to pay.

Producer Surplus

Producer surplus is the difference between the price received by producers for a good and the minimum price they are willing to accept, indicating the benefit producers receive from selling at market prices.