Microeconomics
Group1Definition:
- The branch of economics that analyzes the market behavior of
individual consumers and firms in an attempt to understand the
decision-making process of firms and households.
Principles of Microeconomicsa. Scarcity Principle - An economic
principle in which a limited supply of a good, coupled with a high
demand for that good, results in a mismatch between the desired
supply and demand equilibrium. Because of this, people must make
choices among different items due to their unlimited wants but
limited resources.b. Opportunity Cost Principle The cost of an
alternative that must be forgone in order to pursue a certain
action. Put another way, the benefits you could have received by
taking an alternative action.c. Cost - Benefit Principle- A
principle that says a person should take an action if, and only if,
the extra benefit from taking it is greater than the extra cost.d.
Voluntary Exchange Principle The principle of voluntary exchange is
based on the notion that people act in their own self-interest.
Self-interested people wont exchange one thing for another unless
the trade makes them better off. (Wikipedia 2014)e. Diminishing
Returns Principle - A principle that states that there is a
decrease in the marginal (per-unit) output of a production process
as the amount of a single factor of production is increased, while
the amounts of all other factors of production stay constant.
(wikipedia 2014)f. Incentive Principle- A person( or a firm or
society) is more likely to take an action if its benefits rises,
and is less likely to take if its cost rises. In short incentives
matter. An incentive motivates a person to take an action.
(Wikipedia 2014)
CONCEPTS OF MICROECONOMICSa. Choice (McCorkle ,2010)- What
someone must make when faced with two or more alternative uses of a
resource (also called economic choice). b. Resources (Suitor MC
et.al 2000)- All natural, human, and human-made aids to production
of goods and services (also called productive resources).
c. Demand and Supply (Heakal 2013) One of the most fundamental
concepts of economics and it is the backbone of a market
economy.
c.1) Demand - refers to how much (quantity) of a product or
service is desired by buyers. c.2) Supply - represents how much the
market can offer.d. Market (C.A. Ruiz, 2010) One of the many
varieties of systems, institutions, procedures, social relations
and infrastructures whereby parties engage in exchange. While
parties may exchange goods and services by barter, most markets
rely on sellers offering their goods or services (including labor)
in exchange for money from buyers. It can be said that a market is
the process by which the prices of goods and services are
established.
e. Price System (R.B. Langan, 2000)A component of any economic
system that uses prices expressed in any form of money for the
valuation and distribution of goods and services and the factors of
production.
g. Productivity (V.Piana, 2001)-Measure of thequantityof output
produced by one unit of production input in a unit of time.The
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