Microeconomics Principles and Real-World Examples
Microeconomics: Key Concepts and Applications
1. Production and Costs
1.1. – PAF Efficiency: Understanding efficient Production Possibility Frontiers (PAF).
1.2. – PAF and Physical Production Units: Analyzing PAF in terms of physical production units.
1.3. – Three Economic Problems of the Market Agent: Identifying the core economic challenges faced by market agents.
1.4. – Wine Grapes: Two Efficient Production Methods: Comparing efficient methods in wine grape production.
1.5. – Technological Improvement: No Change in Others: Examining the impact of technological advancements in a specific sector.
1.6. – Choice of Walking or Taking Transportation: Illustrating opportunity cost with a simple choice.
1.7. – Shortage: Unlimited Wants: Explaining the concept of scarcity and unlimited wants.
1.8. – Resource Shortage: Criteria: Defining the criteria for resource scarcity.
1.9. – Radio Production Time: Calculating production time (9 – 6 = 3).
1.10. – Opportunity Cost of Port Wine: Understanding the concept of opportunity cost using the example of time and port wine.
1.11. – Limited Resources: Cars and Petroleum: Illustrating resource limitations with cars and petroleum.
1.12. – PPF Curve Shifts Outward: Technological Advancement: Explaining how technological advancements shift the Production Possibilities Frontier (PPF) outward.
1.13. – Opportunity Cost of Port Wine (Duck PAF): Calculating opportunity cost within a specific production context.
1.14. – Microeconomics: Tortilla Price Increase: A microeconomic example of price changes.
1.15. – Short-Run Supply Curve: Adding Offered Quantities: Describing the short-run supply curve.
1.16. – Opportunity Cost of Vacation: Potential Malaria Risk: Illustrating opportunity cost with a vacation example, including potential risks.
1.17. – Football Cup or Alternative Purchase: Another example of opportunity cost.
1.18. – Perfect Competition in the Long Run: No Change in Others: Describing long-run equilibrium in a perfectly competitive market.
1.19. – Analyzing Consumer Spending (CoNS): Processes to Sign: Examining consumer spending analysis.
2. Supply and Demand
2.1. – Price of X, Price of Y, Income (Px, Py, G, Y): -, +, +, +: Illustrating the relationship between price, income, and demand (negative for own price, positive for substitutes, positive for income if normal good).
2.2. – Decreasing Production Costs: Rightward Shift of the Supply Curve: Explaining the impact of decreased production costs on supply.
2.3. – Increase in Demand: Rightward Shift of the Demand Curve: Explaining the impact of increased demand.
2.4. – Increase in State Tax: Demand Decreases: Illustrating the impact of taxes on demand.
2.5. – Excess Supply Increase: Prices, Datalink, and Soul: Describing the consequences of excess supply.
2.6. – Increased Gas Prices: Decreased Rental Demand: Illustrating the relationship between complementary goods.
2.7. – Potatoes (Inferior Good): Leftward Shift of the Demand Curve: Explaining the impact of increased prices of complements or decreased prices of substitutes on an inferior good.
2.8. – Rightward Shift of the Supply Curve: Technological Progress / Decreased Production Costs: Explaining factors that shift the supply curve to the right.
2.9. – Excess Demand Increase: Demand Shift: Describing the consequences of excess demand.
2.10. – Bus: Increased Rates Without Informing Passengers: An example of price changes without communication.
2.11. – Law of Demand: Price and Quantity Variations: Explaining the law of demand, where changes in price lead to changes in quantity demanded.
2.12. – Government Imposes Maximum Prices: Quantity Offered Decreases Below Equilibrium: Explaining the impact of price ceilings.
2.13. – Government Public Campaign: Reduced Cigarette Demand: Illustrating the impact of public campaigns on demand.
2.14. – Equilibrium: Quantity Supplied Equals Quantity Demanded: Defining market equilibrium.
2.15. – Money Market Rates and Equilibrium: Price Above Equilibrium (Price Floor): Explaining the impact of price floors.
2.16. – Fish: Decreased Supply of Fish: Illustrating a decrease in supply.
2.17. – Increased Fishing Price: Increased Meat Demand: Illustrating the relationship between substitute goods.
2.18. – Demand (Q = 10 – P) and Supply (Q = 2 + P): Equilibrium Price Calculation: Calculating equilibrium price (10 – P = 2 + P => P = 4).
2.19. – Law of Demand: Negative Slope of the Demand Curve: Explaining the negative slope of the demand curve.
3. Elasticity and Consumer Behavior
3.1. – Substitutes: Elastic Demand: Explaining the concept of elastic demand for substitute goods.
3.2. – Child’s Store: Lack of Understanding of Microeconomics: A humorous observation.
3.3. – Rates Increase by 1%, Trout Demand Decreases by 5%: Complementary Goods: Illustrating the concept of complementary goods and price elasticity of demand.
3.4. – Consumer Equilibrium: Consumer Satisfaction: Defining consumer equilibrium.
3.5. – Coffee Consumer Equilibrium: Reduced Coffee Demand, Increased Utility: Describing how a consumer reaches equilibrium.
3.6. – Price Elasticity of Demand for Petroleum: Close to 0: Explaining the relatively inelastic demand for petroleum.
3.7. – Addicts’ Tobacco Consumption Demand: Inelastic: Describing the inelastic demand for addictive goods.
3.8. – Hypothetical Consumer Behavior: Purchasing Function: Describing consumer behavior based on purchasing power.
3.9. – Price Elasticity of Demand Function: Issues: Mentioning potential issues with the price elasticity of demand function.
3.10. – Negative Cross-Price Elasticity of Demand: Complementary Goods: Explaining the concept of negative cross-price elasticity.
3.11. – Consumer Equilibrium Condition: Marginal Utility Equals Relative Prices: Stating the condition for consumer equilibrium.
3.12. – Normal Goods with Price Elasticity of Demand of 0.5: Meat: Providing an example of a normal good with a specific price elasticity.
3.13. – Effective Income for Normal Goods: Positive: Explaining the relationship between income and demand for normal goods.
3.14. – Higher Price Elasticity of Demand: More Substitute Goods: Explaining the relationship between elasticity and the availability of substitutes.
3.15. – Decreasing Marginal Utility: Increased Consumption: Explaining the law of diminishing marginal utility.
3.16. – Marginal Utility of Income: Previous: Referencing a previous point.
3.17. – Increasing Marginal Rate of Substitution (MRS): Decreasing: Describing the behavior of MRS.
3.18. – MRS: MRS = Price of Meat / Price of Fish: Defining the Marginal Rate of Substitution.
4. Production Function and Costs
4.1. – Short-Run Production Function: Possesses/Displays: Describing the characteristics of a short-run production function.
4.2. – Decreasing Levels of Employment: Decreasing Marginal Product (PME): Explaining the law of diminishing marginal returns.
4.3. – Cafeteria Owner: Law of Diminishing Returns: Applying the law of diminishing returns to a specific business.
4.4. – Telephone Company: Technical Efficiency and Economy: Discussing efficiency in a telephone company.
4.5. – Government Nuclear Plant: Income/Costs: Analyzing the income and costs of a government-owned nuclear plant.
4.6. – Public Management: Increasing Total Cost (CT): Describing the behavior of total costs in public management.
4.7. – Five Students and Average Fixed Cost (CMe): Fixed Function of Average Variable Cost (CMeC): Describing cost functions.
4.8. – Inventor of Petroleum Substitute: Decreasing Long-Run Average Cost (CMeL): Explaining the impact of innovation on long-run average costs.
4.9. – Owner with Extra Large Profits: Total Revenue (IT) Greater Than Total Cost (CT): Defining the condition for extra-large profits.
4.10. – Love of Home: Total Variable Cost (CV) Equals Total Revenue (IT): Describing a specific cost-revenue relationship.
4.11. – Planning Study Schedule: Marginalizing Production Function: Applying the concept of marginal analysis to study planning.
4.12. – Water Falls: Reduced Marginal Costs: Explaining the impact of a resource abundance on marginal costs.
5. Perfect Competition
4.13. – Production Levels Along the Supply Curve (CML): CMC: Describing the relationship between the supply curve and marginal cost.
4.14. – Perfect Competition: Many Buyers and Sellers: Defining a key characteristic of perfect competition.
4.15. – Price-Taker: Market Price: Explaining the concept of a price-taker in perfect competition.
4.16. – Watchmakers: Previous: Referencing a previous point.
4.17. – Egyptians: Shutdown Point / Price Equals Average Variable Cost (CVMe): Defining the shutdown point for a firm.
4.18. – Short-Run Supply Curve: Adding Quantities Offered at Different Prices: Describing the short-run supply curve.
4.19. – Opportunity Cost of Vacation: Potential Malaria and Other Costs: Reiterating the concept of opportunity cost.
4.20. – Function Studied in Economics: Null: A statement that needs further context.
5.1. – Long-Run Equilibrium in Perfect Competition: No Change in Others: Describing long-run equilibrium.
5.2. – Analyzing Consumer Spending: Processes to Sign: Reiterating a previous point.
5.3. – Perfect Competition: Demand Curve is Horizontal: Describing the demand curve faced by a firm in perfect competition.
5.4. – Linear PPF: Constant Opportunity Cost of Port Wine: Explaining the relationship between a linear PPF and constant opportunity cost.
5.5. – Factor Not Present in Perfect Competition: Committed Seller: Identifying a characteristic *not* found in perfect competition.
5.6. – Self-Fabric Chairman: Previous: Referencing a previous point.
5.7. – Cost and Price in Perfect Competition: P = MC and P > CVMe: Stating the conditions for profit maximization and operation in perfect competition.
5.8. – Studio Central Market in Perfect Competition: Previous: Referencing a previous point.
5.9. – Decreasing Production Costs: Rightward Shift of the Supply Curve: Reiterating a previous point.
5.10. – Motorcycle Workshop in Perfect Competition: Leftward Shift of the Supply Curve: Describing a situation that would shift the supply curve to the left.
5.11. – Increase in Demand: Rightward Shift of the Demand Curve: Reiterating a previous point.
5.12. – Long-Run Horizontal Supply Curve: Companies with Constant Average Costs (CME): Describing a long-run horizontal supply curve.