Microeconomics

Topics: Supply and demand, Economics, Costs / Pages: 70 (17422 words) / Published: Feb 1st, 2013
Chapter -1 1. The study of microeconomics includes the study of
- Output and employment growth as markets expand in reaction to a rising price level in the economy.
- Business investment and government spending in the marketplace.
- The number of new jobs and income created as the economy grows.
- How firms, workers, consumers, and investors interact and make decisions in the marketplace.
Microeconomics is the study of the behavior of individual economic units: consumers, firms, workers and investors. 2. Microeconomic models illustrate, amongst other things,
- The trade-offs that consumers, workers and firms face and how government can help maximize their well being and profits. - The trade-off between inflation and employment that exists in the economy.
- The trade-offs that consumers, workers and firms face and how these trade offs are best made in the marketplace. - The trade-off between private and public investment that government faces when government raises taxes or sells bonds to finance deficit spending.
Microeconomics studies the trade-offs and interactions of consumers, workers and firms face in the marketplace. 3. In microeconomics, consumer theory studies
- The amount of wages and salaries, profits, dividends and interest earnings that consumers have for making purchases in the marketplace. - How consumers maximize their well-being by choosing to purchase one basket of goods versus another, or by trading-off current for future consumption, given their limited budgets. - Total consumer expenditures on durable versus nondurable goods or services. - Total consumer expenditures and saving in the economy.
This is a broad economy-wide measure. 4. Prices in a competitive market
- Are set by consumers and are not influenced by prices of related goods or the cost of production.
- Are set by government to ensure a minimum profit and income for businesses and workers.
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