Note 1:

Title: Introduction to Microeconomics

Key concepts:

• Scarcity and choice: Microeconomics studies how individuals and firms make choices
under conditions of scarcity. Scarcity is the fundamental economic problem of having
limited resources to satisfy unlimited wants. This leads to the need for individuals and
firms to make choices about how to allocate their resources.
• Demand and supply: The study of demand and supply is central to microeconomics.
Demand refers to the quantity of a good or service that consumers are willing to buy at
a given price, while supply refers to the quantity of a good or service that firms are
willing to sell at a given price. The intersection of demand and supply determines the
market price and quantity of a good or service.
• Elasticity of demand and supply: Elasticity measures the responsiveness of demand or
supply to changes in price. If demand or supply is elastic, a small change in price will
lead to a large change in quantity demanded or supplied. If demand or supply is
inelastic, a small change in price will lead to a small change in quantity demanded or
supplied.
• Market structures: Microeconomics studies different market structures, including
perfect competition, monopolistic competition, oligopoly, and monopoly. In perfect
competition, there are many buyers and sellers, and each firm is a price taker. In
monopolistic competition, there are many buyers and sellers, but firms have some
degree of market power. In oligopoly, a few firms dominate the market. In monopoly,
there is only one firm in the market.
• Consumer and producer surplus: Consumer surplus is the difference between the
maximum price a consumer is willing to pay for a good or service and the actual price
they pay. Producer surplus is the difference between the minimum price a firm is willing
to accept for a good or service and the actual price they receive.
• Externalities: Externalities refer to the unintended consequences of economic activities
on third parties. Positive externalities occur when the benefits of an economic activity
spill over to third parties, while negative externalities occur when the costs of an
economic activity are imposed on third parties. Externalities can lead to market failure,
and government intervention may be needed to correct them.