Microeconomics

Introduction
Macroeconomics is the study of aggregate economic activity to enhance the employment and efficiency use of economic resources. Microeconomics involves the efficient allocation and use of economic resources by individuals and firms interacting within a market system. The efficient allocation and use of fully-employed economic resources is necessary for maximum economic well being.

   Part I How Demand and Supply Affect Profit
Before investigating the interaction of individuals  and firms within a market system we must better understand the market behavior of individuals  and firms. Consumer Choice as measured by     their Market Behavior determines Elasticity of Demand and Total Revenue.  Firm market behavior determines How Cost of Production Affects Supply and the interrelationship between revenue and costs and the resulting profit and loss.

Part II Product and Factor Markets

Product markets (the sale of consumer and industrial goods) and factor markets (the sale of land, labor, capital, and enterprise) determine resource allocation and employment. Specifically, unique degrees of competition of four product markets and many factor market make up microeconomics theory. Price and quantity of products sold are of concern. Also of interest will be the profit and production efficiency of the firms operating within each market model. Of specific interest , the markets for Economic Resources, land labor capital and enterprise, are important. Competitive markets will be contrasted with those containing degrees on monopoly power

  

 

Part III Government Activity,
Capitalism, and Our Mixed Economy

Analyzing Public Sector Economic Activity, The Economics of Government Subsidies,  Government Regulate of business and the Distribution of  Income will be the specific microeconomic questions explored.

 
 

Darin's Music Emporium
A Case Study

Note to students and faculty

Questions of interest to Darin Jones appear in the class Discussion

Questions Darin Jones was pleased. College was going well. His small business, the Quick Clean Laundry Service, was providing him with spending money and the savings he would need upon graduation to open his Music Emporium. The plans for his new business were already beginning to take shape.

Darin's Music Emporium would open in a small city of about 60,000 people. He had learned from a recent  macro economics class that the current recession would probably end just before graduation so the timing would be excellent. Darin had enrolled in a micro-economics class in hopes of learning more about how the principles of supply and demand would help him understand the world of business.

  

 

Darin was concerned about what prices to charge. He knew high prices would lower quantity sold but by how much. What would be the effect on total revenue? Maybe he should charge low prices. He wanted to know how different product prices were interrelated and how would demand be affected by the weak economic recovery being predicted.

Darin was also concerned about the money he would be investing and borrowing for his business. And what about costs? He knew costs such as store rental and store equipment would be determined before he opened his Emporium. He planned to work full time without a salary which would help. But how many people to hire, how much to spend on advertising, and many other costs would have to be determined.

The first lecture in Darin's microeconomics class had concerned the concept of thinking on the margin. Darin remembered having to put margins on his English themes. He understood that these margins represented a change from a place for writing to a place where writing was not allowed. He also knew that synonyms for marginal included additional and incremental. Understanding how economic variables were changing "on the margin" was apparently the key to understanding the interrelationship between revenue and cost. Please join Darin in his search to understand these and other important microeconomic relationships. The search will cover many college courses and a lifetime of business.

  
Chapter 19 
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