Introduction to Microeconomics

Explore microeconomics as the study of individual choices under scarcity, the principles of decision making and interaction, and how prices and quantities emerge in markets.

Explore how tradeoffs link efficiency, equality, and environment, apply rationality at the margin, and assess opportunity cost in daily decisions.

Explain how people respond to incentives by weighing marginal costs and benefits in decision making, from college to production decisions, highlighting rational choices.

Trade and specialization help everyone be better off, while markets organize economic activity and set prices through the invisible hand and price system among buyers and sellers.

Explore how markets and government interact to improve outcomes, address externalities and market failure, protect property rights, and connect productivity to living standards and inflation.

Illustrate how assumptions yield simple models like the circular flow diagram, showing households and firms exchanging factor inputs and goods in two markets, and introduce the production possibilities frontier.

Opportunity cost is what you give up to obtain a good, shown by the slope of the production possibilities frontier between England and France, and growth shifts the PPF right.

The economist as policy adviser uses data to test theories and distinguish positive statements from normative recommendations, explaining inflation and unemployment dynamics and why economists disagree.

Explore how supply and demand determine prices and quantities in a competitive market, highlighting the law of demand, price effects, demand schedules, and market allocation of resources.

Understand the law of supply and the supply schedule, where higher prices increase the quantity supplied. See how the market quantity supplied is the sum of individual supplies.

Explain how price changes move the quantity demanded and supplied for tax preparation software, illustrating market equilibrium, surplus, and shortage.

Explore how the demand curve maps price to quantity, explain steps as buyers enter the market, and illustrate consumer surplus as willingness to pay minus actual price.

Show how consumer surplus equals the area under the demand curve above the price, calculated as a triangle with base and height, and how higher prices reduce it.

Illustrate how price and quantity determine producer surplus and how it changes when prices rise or fall. Show how consumer surplus and total surplus capture the gains from trade.

The market allocates resources via decentralized buyer-seller interactions, maximizing total surplus for efficient allocation. Equilibrium occurs at price 30 and quantity 15,000, creating consumer and producer surplus.

Analyze how world price lower than local price triggers imports, raises consumer and producer surplus, and increases total surplus, while economies of scale and wider variety strengthen welfare from trade.

Examine negative externalities and social costs from gasoline use. See how internalizing external costs via a tax raises price and lowers quantity toward a social optimum.

Taxes on buyers or sellers push price up and quantity down toward the social optimum; internalize negative externalities via taxes, and subsidize positive externalities like vaccination, R&D, and college education.

Apply market-based tools to internalize externalities by using taxes, subsidies, and tradable pollution permits, aligning private decisions with social costs and benefits.

Tradable permits reduce total costs by allowing firms with lower abatement costs to sell permits to higher-cost firms, achieving emissions reductions efficiently.