Nine Principles of Microeconomics to Guide you on Essay
Microeconomics Definition
Microeconomics refers to the study of households, firms, and individuals. Ideally, it looks at how these entities make decisions and how these choices affect the supply, demand, and price of commodities.
Introduction to Microeconomics
Introduction to microeconomics mainly deals with the allocation of scarce resources. The introduction also deals with economic theories and assumptions based on well-defined objectives and consumer behavior. Another major topic in the introduction is the utility maximization and profit maximization. Ideally, the introduction phase is aimed at introducing the aspect of the human puzzle with regards to an economic setting.
Principles Of Microeconomics
The bulk of assignments and research papers mainly revolve around principles of microeconomics. It is very common for students to be asked to handle research and dissertation papers on these principles. There are several principles of microeconomics. We highlight nine principles of microeconomics that also make great essay topics for your research.
1. People face tradeoffs
Economics and life, in general, is about tradeoffs. To get one thing you have to give up something else. It is the same principle when it comes to allocating time and money. In the economic sector, societies and economies trade-off consumer goods for public goods such as social and defense programs. When the government borrows, they trade the consumption of current goods at the expense of future generations.
2. The cost of a service or product is what you forgo to get it
This is one of the major principles of microeconomics. For instance, for you to get a college education, you give up money. You will also incur out of pocket costs such as books and paying for dissertation papers for college to ease the academic burden.
3. Rational people will consider the margin
When rational people make purchasing decisions, they will consider the margin. This means that even a small adjustment in price can affect the decision. The marginal effect needs to be equal to the marginal cost for the rational person.
4. Trade is mutually beneficial
Trade does not only benefit one party. It is not only one side that wins. People are not forced to trade, this means that both sides get to benefit.
5. People respond to incentives
The general rule of thumb is that people always respond to incentives even if this incentive is perceived.
6. Economic activities are organized through markets
An economic system operates in a market. This is where prices are determined and resources allocated. Producers and consumers of goods need to understand these markets.
7. Governments can help improve market outcomes
When markets fail as a result of externalities such as pollution and lack of security, the government can inject funds to boost and improve markets.
8. The standard living of a country is determined by production
A country’s standard of living is largely dependent on the production capacity. A factor such as increasing the minimum wage does not improve the standard of living.
9. The tradeoff between inflation and unemployment
This principle is based on the Phillips curve which shows the relationship between unemployment and inflation.
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