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Micro economics is the study of how people use and exchange resources. It is a broad area of economics that focuses on specific economic agents, such as firms and households. It looks at how people interact with each other and make decisions about what to buy, sell, or produce.
Micro economics analyzes how these agents interact with each other and make decisions. Microeconomics also studies economic phenomena at the level of individual markets. It focuses on topics such as market demand and supply, prices, competition, and incomes.
Why Study Micro economics
Microeconomics is important because it helps us understand how the market works. It also helps us understand how to make decisions in a market economy. It is important because it helps us understand how to optimize resources and minimize costs. Additionally, microeconomics helps business owners and managers allocate their resources efficiently. Finally, microeconomics is important because it helps policy makers design policies that are effective and efficient.
It is different from macro economics, which looks at the economy as a whole.
There are many different fields of micro economics, and professionals in this field may specialize in one or more of these areas. Some common fields of micro economics include:
– Public finance: This field looks at how the government makes decisions about taxes, spending, and regulations.
– Labor economics: This field looks at how workers and employers interact in the labor market.
– Industrial organization: This field looks at how businesses compete with each other in different industries.
– Development economics: This field looks at how different economies develop over time.
Micro economics is a complex and ever-changing field, and new research is constantly being published. This overview provides a brief introduction to some of the key concepts in micro economics.
Demand theory – It is one of the most important concepts in microeconomics. This theory is used to analyze how consumers make decisions about what to buy, and how those decisions affect the prices of goods and services in the market.
Demand theory is based on the idea that consumers will choose to purchase a good or service if they believe that it is worth more than the price they must pay for it. This means that consumers will only purchase a good or service if they believe that the benefits of doing so outweigh the costs.
-Behavioural economics: It is a relatively new field that has seen rapid growth in recent years. Behavioural economics studies the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and how those decisions affect market prices, returns, and resource allocation.
–Externalities and Market Failure – An externality is an effect of a market transaction that is not accounted for by the parties to the transaction. Externalities can be either positive or negative, and can arise from either the production or consumption of a good or service.
Externalities can lead to market failure, which is a situation in which the market does not allocate resources efficiently. Market failure can occur when there are positive externalities, negative externalities, or a combination of the two.
Positive externalities occur when the production or consumption of a good or service benefits someone other than the producer or consumer. For example, education confers benefits not only on the individual who receives the education, but also on society as a whole.
Negative externalities occur when the production or consumption of a good or service imposes costs on someone other than the producer or consumer. For example, pollution from factories imposes costs on people who live near the factory, even if those people are not directly involved in the production process.
-Duopoly: Cournot-Nash Equilibrium – In a duopoly market, there are two firms that produce identical products and face the same demand curve. The firms compete against each other by setting prices. The first mover advantage refers to the fact that the first firm to set a price can influence the market price.
The Cournot-Nash equilibrium is a situation in which both firms in a duopoly market reach an equilibrium, or stable state, in which each firm sets the price that maximizes its own profit given the other firm’s price.
There are two types of Cournot-Nash equilibria: pure and mixed. In a pure Cournot-Nash equilibrium, both firms charge the same price. In a mixed Cournot-Nash equilibrium, the two firms charge different prices.
-Game Theory – In microeconomics, game theory is the study of mathematical models of strategic interaction among rational decision-makers. It is mainly used in economics, political science, and psychology. Game theory is also used to study a wide range of human and animal behaviors, such as cooperation, coordination, competition, and avoidance.
It allows managers to take into account the fact that employees, customers, and other managers are also acting rationally and trying to maximize their own outcomes. This can help managers make better decisions, as they can anticipate how others will respond to their actions. Game theory can also be used to analyze situations where there is not full information, or where there are multiple possible outcomes.
As a student of microeconomics, it is vital that you have a strong understanding of the concepts covered in class. This will ensure that you are able to perform well on exams and other assignments, but for most students this is not the case, since micro economics homework are hard.
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