ECO401 Microeconomics Study Notes

Definition: Study of individual agents in the economy (consumers, firms) and their interactions.
Key Concepts:
- Supply and Demand: Determines prices and quantities in markets.
- Elasticity: Measures responsiveness of quantity demanded or supplied to price changes.
- Utility Maximization: Consumers aim to maximize satisfaction under budget constraints.
- Production and Costs: Analysis of production functions and cost structures of firms.

Classical Economics: Focus on free markets, competition, and the idea of self-regulating economies.
Keynesian Economics: Emphasizes total spending and its effects on output and inflation; advocates for government intervention.
Monetarism: Highlights the role of governments in controlling the amount of money in circulation.
Behavioral Economics: Integrates insights from psychology into economic decision-making processes.

Perfect Competition: Many firms, identical products, free entry/exit, perfect information.
Monopoly: Single firm dominates; unique product, significant barriers to entry.
Oligopoly: Few firms; products can be homogeneous or differentiated; strategic interactions between firms.
Monopolistic Competition: Many firms; differentiated products; some price-setting power.

Fiscal Policy: Government spending and taxation decisions that influence economic activity.
Monetary Policy: Central bank actions (interest rates, money supply) to regulate the economy.
Regulatory Policies: Rules governing business practices, aimed at protecting consumers and ensuring fair competition.
Trade Policy: Tariffs, quotas, and trade agreements affecting international trade and domestic markets.

Definition: Study of the economy as a whole, focusing on aggregate measures.
Key Indicators:
- Gross Domestic Product (GDP): Total value of goods/services produced; indicator of economic health.
- Inflation Rate: Measure of price level increases; affects purchasing power.
- Unemployment Rate: Percentage of the labor force that is jobless and actively seeking work.
Business Cycles: Fluctuations in economic activity, consisting of expansions and recessions.

Microeconomics examines the behavior of individual economic agents, such as consumers and firms, and their market interactions.
Supply and Demand are fundamental concepts that set prices and quantities of goods and services in markets.
Elasticity quantifies how sensitive the quantity demanded or supplied is to changes in price, influencing consumer and producer behavior.
Utility Maximization refers to consumers' goal to achieve the highest possible satisfaction while working within their budget limitations.
Production and Costs involve analyzing how firms turn inputs into outputs and how various cost structures impact their profit margins.

Classical Economics champions free-market mechanisms, competition, and the idea of economies that self-regulate without intervention.
Keynesian Economics stresses the importance of total spending in the economy and its effect on output and inflation, often supporting government intervention to stabilize the economy.
Monetarism focuses on the significance of controlling the money supply as a means to influence economic activity and combat inflation.
Behavioral Economics merges economic analysis with psychological principles to better understand consumer decisions and behaviors.

Perfect Competition features a market with numerous firms selling identical products, allowing free entry and exit, leading to uniform prices.
Monopoly describes a scenario where one firm controls the market, offering a unique product and facing substantial barriers that prevent other firms from entering.
Oligopoly consists of a few firms that hold substantial market power, where products may be similar or distinctive, necessitating strategic decision-making among competitors.
Monopolistic Competition has many firms selling differentiated products, granting them some degree of pricing power due to brand differences.

Fiscal Policy encompasses government spending and tax policies that directly impact economic performance and influence aggregate demand.
Monetary Policy involves the central bank's regulation of money supply and interest rates as tools to manage economic stability and growth.
Regulatory Policies implement legal frameworks to oversee business operations, ensuring consumer protection and equitable market practices.
Trade Policy consists of tariffs, quotas, and trade agreements that regulate international trade and affect domestic economic conditions.

Macroeconomics investigates the economy at an aggregate level, focusing on broad indicators of economic performance.
Gross Domestic Product (GDP) reflects the total monetary value of all goods and services produced within a country, serving as a primary gauge of economic health.
Inflation Rate indicates how much prices for goods and services rise over time, influencing the purchasing power of consumers.
Unemployment Rate measures the proportion of the labor force that is currently jobless yet actively seeking employment, highlighting labor market conditions.
Business Cycles illustrate the ups and downs of economic activity, characterized by alternating periods of expansion and recession.