Introduction to Microeconomics Essay Example | Topics and Well Written Essays - 1000 words

Introduction to Microeconomics - Essay Example pply in positively related to price because at a higher price producers can earn more profit by supplying more output.(Ian Hobday, p 100,105) In a market price is determined at the level at which demand equate supply as illustrated in figure 3. This discipline also offers explanation of factors that determine demand and supply. The factors that determine and influence demand are many. Demand is determined by changes in incomes of consumers, changes in tastes and fashion, changes in income tax, changes in population, changes in price of related goods, advertising and others. All of these factors bring shifts in demand curve and change equilibrium price and output. â€Å"British Gas reported 98 percent increase its six months operating profits of 2010 as compared to the same period during previous year â€Å"The profits reached to ?585m due to unusual cold winter which boosted the demand of  gas prices  by 8 percent.†( Aubin Lawrence, 2010) Price of related goods affects de mand has been witnessed, â€Å"With oil constantly trading above $100, consumers -- particularly those looking to buy cars -- are vying for alternatives that aren't too heavy on their wallets†(Debarati Bose,2011) Supply is determined by changes in costs of production, technical progress, changes in weather/disasters and others. All of these cause supply curve to shift and change equilibrium price and quantity.(Dan Moynihan and Brian Titley , p158-165) see figure 4 .On many occasions shortages are observed due to climatic changes and so forth. â€Å"European wheat stocks are expected to hit a 30-year low as dry weather could cut yields of some major European producers up to 20 percent†( Cat Contiguglia, 2011).See figure 4. Microeconomics analysis tells firms whether of raise prices or to decrease them. This...This paper demonstrates the main concepts of the Microeconomics. There is also 4 figures in the essay which graphically illustrates these concepts Microeconomics can be defined as a study of market behavior at micro level such as behavior of households and firms. It focuses on interactions between individual buyers and sellers and the factors that influence their decisions. In its broadest sense study of microeconomics deals with the efficient allocation of limited recourses that are available to fulfill unlimited wants of the society. This concepts is known as the basic economic problem which occurs due to scarcity. Due to scarcity individuals have to make a choice. This applies the principle of â€Å"opportunity cost† which is the cost of next best alternative forgone. Goods and services are produced by bringing together the four factors of production namely, land, labor, capital and enterprise. Production Possibility curve demonstrates principles of opportunity cost and full-employment Microeconomics explains price determination in goods and services markets and analyses the behavior of firms and consumers. This discipline also offers explanation of factors that determine demand and supply. Demand is determined by changes in incomes of consumers, changes in tastes and fashion, changes in income tax, changes in population, changes in price of related goods, advertising and others. Supply is determined by changes in costs of production, technical progress, changes in weather/disasters and others. with the help of microeconomics societies can predict behavior of firms and consumers and respond to possible changes in the markets. Causes and correlations can be identified with the help of theories that the disciple offers.