Fundamentals of Microeconomics
Fundamentals of Microeconomics
In the world today product and services are both key to the survival of mankind. Depending on the demand from consumers, companies will see an increase or decrease of the items they produce or the service rendered. In the article of trends in US gasoline and ethanol use and petroleum production and imports these items will be looked at; as well as a discussion of the fundamentals of microeconomics. First, in order to understand what the fundamentals of microeconomics are, there must be a clear understanding of what it is. Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity so it could lower prices and better compete in its industry (Investopedia, 2009).
Microeconomics breaks down into the following tenets: Individuals make decisions based on the concept of utility. In other words, the decision made by the individual is supposed to increase that individual's happiness or satisfaction. This concept is called rational behavior or rational decision-making. Businesses make decisions based on the competition they face in the market. The more competition a business faces, the less leeway it has in terms of pricing. Both individuals and consumers take the opportunity cost of their actions into account when making their decisions.
At the core of how a consumer makes a decision is the concept of individual benefit, also known as utility. The more benefit a consumer feels a product provides, the more that consumer is willing to pay for the product. Consumers often assign different levels of utility to different goods, creating different
In the world today product and services are both key to the survival of mankind. Depending on the demand from consumers, companies will see an increase or decrease of the items they produce or the service rendered. In the article of trends in US gasoline and ethanol use and petroleum production and imports these items will be looked at; as well as a discussion of the fundamentals of microeconomics. First, in order to understand what the fundamentals of microeconomics are, there must be a clear understanding of what it is. Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity so it could lower prices and better compete in its industry (Investopedia, 2009).
Microeconomics breaks down into the following tenets: Individuals make decisions based on the concept of utility. In other words, the decision made by the individual is supposed to increase that individual's happiness or satisfaction. This concept is called rational behavior or rational decision-making. Businesses make decisions based on the competition they face in the market. The more competition a business faces, the less leeway it has in terms of pricing. Both individuals and consumers take the opportunity cost of their actions into account when making their decisions.
At the core of how a consumer makes a decision is the concept of individual benefit, also known as utility. The more benefit a consumer feels a product provides, the more that consumer is willing to pay for the product. Consumers often assign different levels of utility to different goods, creating different