Introduction to Microeconomics

Study Notes

Introduction to Economics

Economics is the social science that studies how societies allocate scarce resources to satisfy unlimited wants and needs.
It focuses on the choices individuals, businesses, and governments make in the face of scarcity.
Key concepts include supply and demand, opportunity cost, and market structures.

Microeconomics

Microeconomics studies the behavior of individual economic agents (consumers, firms, and industries).
It analyzes how prices are determined in specific markets.
Demand: The quantity of a good or service that consumers are willing and able to purchase at various prices during a specific time period, all other things being equal.
Law of Demand: As price increases, quantity demanded decreases, all else equal.
Factors affecting demand include consumer tastes, prices of related goods, income, and expectations.
Supply: The quantity of a good or service that producers are willing and able to offer at various prices during a specific time period, all else equal.
Law of Supply: As price increases, quantity supplied increases, all else equal.
Factors affecting supply include input prices, technology, and government policies.
Market Equilibrium: The point where the supply and demand curves intersect.
At this intersection, the quantity supplied equals the quantity demanded, resulting in a stable price.
Any price above equilibrium represents a surplus (excess supply), and any price below equilibrium represents a shortage (excess demand).
Elasticity: Measures the responsiveness of quantity demanded or supplied to a change in a price or another relevant variable.
Price elasticity of demand measures how sensitive quantity demanded is to changes in price.
Price elasticity of supply measures how sensitive quantity supplied is to changes in price.
Income elasticity of demand measures how sensitive quantity demanded is to changes in income.
Market Structures: The nature of competition within an industry.
Perfect competition (many buyers and sellers, homogenous products, free entry and exit).
Monopoly (single seller, no close substitutes, high barriers to entry).
Monopolistic competition (many sellers, differentiated products, relatively easy entry).
Oligopoly (few sellers, interdependence among firms, significant barriers to entry).

Macroeconomics

Macroeconomics studies the economy as a whole, focusing on aggregate variables such as inflation, unemployment, economic growth, and international trade.
Gross Domestic Product (GDP): The market value of all final goods and services produced within a country in a given period.
Measures the size of an economy and changes over time.
Inflation: The rate at which the general level of prices for goods and services is rising, and, consequently, purchasing power is falling.
Measured by various price indexes.
High inflation can lead to economic instability.
Unemployment: The percentage of the labor force that is actively seeking employment but unable to find work.
Different types of unemployment (frictional, structural, cyclical).
Economic Growth: The increase in the production of goods and services over time.
Measured by changes in real GDP.
Factors contributing to growth include technological advancements, capital accumulation, and human capital development.
Fiscal Policy: Government policies that involve government spending and taxation.
Used to influence the economy's overall level of output and employment.
Monetary Policy: Policy that involves influencing the money supply and credit conditions to stimulate or restrain economic activity.
Conducted by central banks.

International Economics

Studies the economic relationships between countries.
Trade: The exchange of goods and services between nations.
Benefits from specialization and comparative advantage.
Exchange rates: The prices of one country's currency in terms of another.
Affects international trade and investment.
International finance: Flows of money across national borders.
Includes foreign direct investment and foreign aid.
Globalization: Increasing interconnectedness of national economies.
Driven by lower barriers to trade and investment.

Description

This quiz covers the fundamentals of microeconomics, including key concepts such as demand, supply, and market structures. Explore how individual economic agents make choices in the face of scarcity and understand the laws governing demand and supply. Perfect for students seeking a solid foundation in economic principles.