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Microeconomics Presented by Abigail Atiwag Microeconomics is a branch of economics that studies the behavior of individual agents such as consumers producers firms and markets focusing on how they make decisions and interact in various economic settings Key concepts and topics in microeconomics include Supply and Demand Supply and demand are fundamental concepts in microeconomics that analyze how prices and quantities of goods and services are determined in markets The law of demand states that as the price of a good increases the quantity demanded decreases while the law of supply states that as the price of a good increases the quantity supplied increases Elasticity Elasticity measures the responsiveness of quantity demanded or supplied to changes in price income or other factors Price elasticity of demand and supply income elasticity and cross price elasticity are important concepts in understanding how sensitive consumers and producers are to price changes and economic conditions Consumer Theory Consumer theory examines how individuals make consumption decisions based on preferences budget constraints prices utility maximization indifference curves budget lines consumer equilibrium and the concept of marginal utility Producer Theory Producer theory analyzes how firms and producers make production decisions based on costs production functions technology input choices output levels profit maximization production costs fixed costs variable costs total costs and the concept of marginal productivity Market Structures Microeconomics studies different market structures that influence the behavior of firms and market outcomes Market structures include perfect competition monopolistic competition oligopoly and monopoly each characterized by varying degrees of competition market power product differentiation entry barriers pricing strategies and market behavior Perfect Competition In perfect competition many small firms compete in a market with identical or homogeneous products free entry and exit perfect information and no market power Prices are determined by market forces and firms are price takers Monopoly A monopoly exists when a single firm dominates a market with no close substitutes significant barriers to entry and substantial market power to set prices above marginal costs Monopolies can lead to inefficiencies reduced consumer surplus and concerns about market power abuse Monopolistic Competition Monopolistic competition is characterized by many firms producing differentiated products limited market power some degree of pricing flexibility product differentiation strategies and non price competition advertising branding quality differentiation Oligopoly Oligopoly occurs when a small number of large firms dominate a market leading to interdependence among firms strategic decisions pricing behavior output levels collusion possibilities competition dynamics game theory analysis and barriers to entry Market Failures Microeconomics explores market failures and inefficiencies that occur when markets do not allocate resources optimally Market failures can result from externalities positive or negative public goods imperfect information asymmetric information market power incomplete markets natural monopolies and public policy interventions are often needed to address these failures Welfare Economics Welfare economics assesses the efficiency and fairness of market outcomes and public policies by analyzing consumer surplus producer surplus total surplus deadweight loss Pareto efficiency market interventions price controls taxes subsidies social welfare functions and the trade offs between equity and efficiency Factor Markets Microeconomics also examines factor markets for labor capital land and entrepreneurship including wage determination labor supply and demand human capital investments rental markets interest rates capital markets land markets factor pricing income distribution and the role of factors of production in economic growth Game Theory Game theory is used in microeconomics to analyze strategic interactions decision making and outcomes in situations where multiple agents or players have conflicting interests incentives and information Game theory models include prisoner s dilemma Nash equilibrium dominant strategies coordination games bargaining games and sequential games Public Economics Public economics explores the role of government in the economy public goods provision market regulation taxation fiscal policy public expenditure social insurance income redistribution externalities management public choice theory government failure and policy analysis for addressing societal needs and promoting economic welfare Microeconomics provides a foundation for understanding individual economic behavior market interactions resource allocation pricing mechanisms competition dynamics market efficiency and the impact of policy interventions on economic outcomes Policymakers businesses consumers investors economists and individuals need to make informed decisions and analyze economic issues at the micro level THANK YOU

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SLU ECON 314 - Microeconomics: Analyzing Individual Economic Choices

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