Jeffrey Glen Among the many branches of economics two of the best known areas are the study of Macroeconomics and Microeconomics. The two concepts are closely intertwined and can sometimes be confusing.
However, economics has an impact on every Microeconomic concepts of our lives because, at its heart, it is a study of choices Microeconomic concepts why and how we make them.
In this article, we'll look at some basic economic concepts that everyone should understand. Scarcity You implicitly understand scarcitywhether you are aware of it or not. Simply put, the world has limited means to meet unlimited wants, so there is always a choice to be made.
For example, there is only so much wheat grown every year. Some people want bread; some people want cereal; some people want beer, and so on. How do we decide how much flour should be made for bread? One answer is a market system. Supply and Demand The market system is driven by supply and demand.
Let's say people want more beer, meaning the demand for beer is high. This demand means you can charge more for beer, so you can make more money on average by changing wheat into beer than grinding that same wheat into flour. More people start making beer and, after a few production cycles, there is so much beer on the market that prices plummet.
This extreme and simplified example does encapsulate the wonderful balancing act that is supply and demand. The market is generally much more responsive in real life, and true supply shocks are rare — at least ones caused by the market are rare. On a basic level, supply and demand helps explain why last year's hit product is half the price the following year.
Costs and Benefit The concept of costs and benefits encompasses a large area of economics that has to do with rational expectations and rational choices. In any situation, people are likely to make the choice that has the most benefit to them, with the least cost — or, to put it another way, the choice that provides more in benefits than in costs.
Going back to beer: If demand is high, the breweries of the world will hire more employees to make more beer, but only if the price of beer and the sales volume justify the additional costs to the payroll and the materials needed to brew more.
This extends far beyond financial transactions.
University students perform cost-benefit analysis on a daily basis, by focusing on certain courses that they believe will be more important for them, while cutting the time spent studying or even attending courses that they see as less necessary.
Although people are generally rational, there are many, many factors that can throw our internal accountant out the window. Advertising is one that everyone is familiar with. Commercials tweak emotional centers of our brain and do other clever tricks to fool us into overestimating the benefits of a given item.
Some of these same techniques are used quite adeptly by the lotteryshowing a couple sailing a yacht and enjoying a carefree life. This image and its emotional message "this could be you" overwhelm the rational part of your brain that can run the very, very long odds of actually winning.
So, cost and benefits may not rule your mind all the time.Microeconomics: Introduction and basic concepts 1.
Introduction to Micro and Macro Economics The whole economic theory is broadly divided into two parts – Micro economics and Macro economics.
These two terms were at first used by Ragner Frisch in Study Flashcards On Microeconomics: 7 Core Principle + 64 Key Concepts at leslutinsduphoenix.com Quickly memorize the terms, phrases and much more. leslutinsduphoenix.com makes it easy to get the grade you want!/5(1).
Microeconomics: Introduction and basic concepts 1. Introduction to Micro and Macro Economics The whole economic theory is broadly divided into two parts – Micro economics and Macro economics.
These two terms were at . Microeconomics is the branch of economics that analyzes market behavior of individuals and firms in order to understand their decision-making process.
Key concept indicators.
For each microeconomic concept: Defines or describes the microeconomic concept. Processes and/or presents sufficient data or information related to the microeconomic concept to support: a detailed explanation of the microeconomic concept; a justification about the implications of microeconomic concept.
Microeconomics (from Greek prefix mikro-meaning "small" + economics) is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.