"Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms."
The study of individual economic agents such as consumers, firms, and markets.
Supply and Demand: The basic model of microeconomics, which examines how the price and quantity of goods are determined by the interaction of buyers and sellers in a market.
Elasticity: A measure of how responsive quantity demanded or supplied is to changes in price or other factors. Understanding elasticity is crucial for pricing decisions and analyzing the effects of taxes or subsidies.
Market Structures: The different types of market structures, including perfect competition, monopolistic competition, oligopoly, and monopoly, and how they affect prices, output, and efficiency.
Consumer Behavior: The study of how consumers make decisions about what to buy, how much to buy, and when to buy. Includes topics such as utility theory, budget constraints, and consumer surplus.
Production and Costs: The study of how firms produce goods and services, including factors of production, technology, and economies of scale. Also examines how costs vary with output and how firms make production decisions.
Profit Maximization: The theory that firms will produce at the point where their marginal revenue equals their marginal cost, in order to maximize profits. This concept forms the basis of many microeconomic models.
Game Theory: The study of how people interact strategically in situations where the outcome depends on the choices of multiple actors. Used to analyze situations such as price competition, bargaining, and oligopoly behavior.
Externalities: The costs or benefits that affect people who are not involved in a market transaction. For example, pollution is a negative externality that imposes costs on society as a whole, while education is a positive externality that benefits society.
Public Goods: Goods or services that are non-excludable and non-rivalrous, meaning that they are available to everyone and their consumption by one person does not reduce their availability to others. Examples include national defense, scientific research, and parks.
Market Failure: The situations where markets fail to allocate resources efficiently, due to externalities, public goods, monopoly power, or other factors. Can lead to inefficiency or inequity, and may require government intervention.
Welfare Economics: The study of how to measure the overall welfare of society, including the concepts of efficiency, equity, and social welfare functions. Used to evaluate the effects of policy interventions on the well-being of different groups.
Information Economics: The study of how information affects economic behavior and outcomes, including adverse selection, moral hazard, and signaling. Particularly relevant in markets where there is asymmetric information, such as insurance or financial markets.
"Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as a whole, which is studied in macroeconomics."
"One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses."
"Microeconomics shows conditions under which free markets lead to desirable allocations."
"It also analyzes market failure, where markets fail to produce efficient results."
"While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment—and with national policies relating to these issues."
"Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on microeconomic behavior and thus on the aforementioned aspects of the economy."
"Much of modern macroeconomic theories has been built upon microfoundations—i.e., based upon basic assumptions about micro-level behavior."