Microeconomics: Concise Notes
1. Definition of Microeconomics:Microeconomics studies individual units of an
economy—households, firms, and [Link] focuses on how these entities make decisions to
allocate limited resources
.2. Demand and Supply:Demand: The quantity of a good that consumers are willing and able to
purchase at different price [Link] of Demand: Price and quantity demanded have an inverse
[Link]: The quantity of a good that producers are willing to sell at different price
[Link] of Supply: Price and quantity supplied have a direct [Link] Equilibrium:
The point where demand equals supply, determining the price and quantity in a market.
3. Elasticity:Price Elasticity of Demand (PED): Measures the responsiveness of quantity
demanded to changes in [Link]: PED = % Change in Quantity Demanded / % Change in
PriceIncome Elasticity of Demand: Measures the responsiveness of demand to changes in
[Link] Elasticity of Demand: Measures how the demand for one good changes in
response to the price change of another good.
4. Types of Markets:Perfect Competition: Many buyers and sellers, homogeneous products, no
barriers to entry, price [Link]: Single seller, unique product, high barriers to entry,
price [Link]: Few sellers, interdependent decision-making, can lead to collusion or
[Link] Competition: Many sellers, differentiated products, some control over
price.
5. Cost Concepts:Fixed Costs (FC): Costs that do not vary with output (e.g., rent).Variable Costs
(VC): Costs that vary with output (e.g., raw materials).Total Cost (TC): TC = FC + [Link]
Cost (AC): AC = TC / Quantity [Link] Cost (MC): The cost of producing one more
unit of output.6. Revenue Concepts:Total Revenue (TR): TR = Price × [Link]
Revenue (AR): AR = TR / Quantity (Price under perfect competition).Marginal Revenue (MR):
The additional revenue from selling one more unit of output.
7. Consumer and Producer Surplus:Consumer Surplus: The difference between what
consumers are willing to pay and what they actually [Link] Surplus: The difference
between what producers are willing to accept and what they actually receive.
8. Opportunity Cost:The value of the next best alternative foregone when a choice is made.
9. Marginal Utility:The additional satisfaction a consumer gains from consuming one more unit
of a good.
10. Production and Costs:Law of Diminishing Returns: As more units of a variable factor are
added to a fixed factor, the marginal product of the variable factor eventually
[Link] of Scale: Lowering the average cost per unit by increasing production in
the long [Link] of Scale: Increasing costs per unit as production expands beyond a
certain point.
These notes cover fundamental concepts of microeconomics essential for understanding market
behavior and decision-making.
