Key learnings from Micro Economics module
It was a very informative session and an eye opener. I was under the impression that economics only deals with fiscal and monetary policies. This was my first acquaintance with micro economics and it opened up a new perspective. I am in a position now to understand many events that happen every day around me. I am able to have a broad idea about how these events may have a direct or indirect impact on me as an individual (professionally as well as personally) and to an organisation. Detailed below are a few (but not all) significant points that were new to me : Law of Demand & Supply :
The quantity demanded of a good falls when the price rises and the quantity supplied of a good rises when the price rises. Price of a good adjusts to bring the quantity supplied and demanded into balance. Other determinants of consumers demand include income, price of substitutes, expectations etc. Any change in these factors shifts the demand curve. Equilibrium :
A situation where market price is at a level at which supply and demand quantity equals. Equilibrium of supply and demand maximizes the sum of consumer and producer surplus. Surplus :
A situation in which supply is greater than demand
Consumers’ surplus :
Buyers’ willingness to pay for a good minus the amount the buyer actually pays for it. It measures benefit buyers gets by participating in a market. Producers’ surplus :
The amount sellers receive for their goods minus their costs of production. It measures benefit sellers get from participating in a market. Dead Weight Loss :
The fall in total surplus that results from a market distortion. Marginal Utility :
Additional utility derived by consuming additional unit quantity of goods.
Competitive markets :
Prices in a perfectly competitive market always equal marginal cost of production. To maximise profit firms chooses output quantity such that marginal revenue equals marginal cost. A...