Fundamentals of Microeconomics is a unique textbook in the field of Microeconomics, which is a core subject for undergraduate and diploma students pursuing courses in Business and various other courses such as engineering, computer sciences, architecture, management and many more. It is specially designed to meet the needs of students studying economics first time at the tertiary level and for non-economists who want to appreciate the subject matter of Microeconomics.
This book is the first volume of a series and covers, in the main, the meaning and scope of Economics as a discipline. It goes ahead to treat the key essentials of Microeconomics, ie demand, supply, market equilibrium, elasticity of demand, elasticity of supply and consumer choice theory. The second volume will treat theory of production, Cost theory, theory of the firm-perfect competition, monopoly and monopolistic competition.
The rich experience of the writer in the teaching of Economics plays out in meeting the needs of the student throughout the pages of the book. The coverage and structure of the book have been designed taking into account the syllabi of Microeconomics courses prescribed by higher education institutions and universities. It is clearly written in a student-friendly manner, and replete with easy to-do exercises so that the first time learner of Economics can do a self-study with this book and excel in Microeconomics. The book will be useful for readers who often have difficulty in understanding microeconomic concepts. This book is packed with illustrations, sketch graphs and diagrams that are altogether functional and relevant to the theories presented. Finally, the author hopes the reader is able to apply the basic theories, principles and concepts to help solve everyday economic and business problems that they encounter daily.
Table of Contents
OVERVIEW OF ECONOMICS
1.1 INTRODUCTION
1.2 DEFINITION OF ECONOMICS
1.3 DEFINITION OF MICROECONOMICS
1.4 DEFINITION OF MACROECONOMICS
1.5 EXPLANATION OF SOME KEY CONCEPTS IN ECONOMICS
1.5.1 Ends
1.5.2 Means
1.5.3 Scarcity
1.5.4 Choice
1.5.5 Scale of Preference
1.5.6 Opportunity Cost
1.6 ECONOMIC APPLICATION OF THE CONCEPT OF OPPORTUNITY COST
1.6.1 Opportunity Cost and the Individual
1.6.2 Opportunity Cost and the Firm
1.6.3 Opportunity Cost and the Government
1.6.4 Conditions under which Opportunity Cost is Zero
1.6.5 General Importance of Opportunity Cost
1.7 OPPORTUNITY COST AND THE PRODUCTION POSSIBILITY CURVE (PPC)
1.7.1 Production Possibility Curve (PPC)
1.8 IMPORTANCE OF THE STUDY OF ECONOMICS
1.8.1 Households
1.8.2. Firms
1.8.3 Government
1.9 THE SCOPE OF ECONOMICS
1.9.1. Production activities
ECONOMIC SYSTEMS AND THEIR FUNCTIONS
2.1 OVERVIEW OF ECONOMIC SYSTEMS
2.2 TRADITIONAL ECONOMY
2.2.1 Advantages of a Traditional Economy
2.2.2 Disadvantages of Traditional Economy
2.3 CAPITALIST ECONOMY
2.3.1 Features of a Capitalist Economy
2.3.2 Advantages of a Capitalist Economy
2.3.3 Disadvantages of a Capitalist Economy
2.4 SOCIALIST ECONOMY
2.4.1 Features
2.4.2 Advantages of Socialist Economy
2.4.3 Disadvantages of a Socialist Economy
2.5 MIXED ECONOMY
2.5.1 Features of a Mixed Economy (Using Ghana as a case)
2.5.2 Advantages of a Mixed Economy
2.5.3 Disadvantages of a mixed Economy
2.6. FUNCTIONS OF AN ECONOMIC SYSTEM
2.6.1 Primary functions of an Economy
2.6.2 Secondary Functions
DEMAND AND SUPPLY
3.1 DEMAND
3.1.1 Factors affecting Demand
3.1.2 Demand Schedule
3.1.3 The Law of Demand
3.1.4 Exceptional Demand Curves/Deviations from the Law of Demand
3.1.5 Changes in Demand
3.1.6 Consumer and Producer Surpluses
3.2 SUPPLY
3.2.1 Factors affecting Supply
3.2.2 Supply Schedules
3.2.3. The Law of Supply
3.2.4 Exceptional supply curves/deviations from the law of supply
3.2.5 Changes in Supply
PRICE DETERMINATION
4.1 INTRODUCTION: THE CONCEPT OF PRICE
4.1.1 Bargaining/Haggling
4.1.2 Auctioning
4.1.3 Tender
4.1.4 Government pricing/Price control
4.1.5 Demand and supply
4.2 ESTABLISHING EQUILIBRIUM PRICE AND EQUILIBRIUM QUANTITY
4.3 EQUILIBRIUM PRICE DETERMINATION-CHANGES IN DEMAND AND SUPPLY
4.3.1 A Change in Demand and the Impact on Equilibrium Price
4.3.2 A Change in Supply and its Impact on Equilibrium Price
4.4 TYPES OF DEMAND
4.4.1 Competitive Demand
4.4.2 Complementary/Joint demand
4.4.3 Derived Demand
4.4.4 Composite Demand
4.5 TYPES OF SUPPLY
4.5.1 Competitive supply
4.5.2 Complementary or joint supply
4.5.3 Composite supply
ELASTICITY OF DEMAND AND SUPPLY
5.1 MEANING OF ELASTICITY OF DEMAND
5.2 PRICE ELASTICITY OF DEMAND
5.2.1 Definition
5.2.2. Measurement of Price Elasticity of Demand
5.2.3 Formulae for calculating coefficient of price elasticity of demand
5.2.3 Classification of price elasticity of demand
5.2.4 Importance of price elasticity of demand
5.2.5 Incidence of taxation
5.3 INCOME ELASTICITY OF DEMAND
5.3.1 Overview
5.3.2 Definition of Income Elasticity of Demand
5.3.3 Measurement of Income Elasticity of Demand
5.3.4 Formulae for Calculating Coefficient of Income elasticity of demand
5.3.5 Implication of the sign of the coefficient of income elasticity of demand
5.3.6 Classification of income elasticity of demand
5.3.7 Importance of Income Elasticity of Demand
5.4 CROSS ELASTICITY OF DEMAND
5.4.1 Introduction
5.4.2 Meaning of Cross Elasticity of Demand
5.4.3 Key Definition of Cross Elasticity of Demand
5.4.4 Measurement of Cross Elasticity of Demand
5.4.5 Formulae for calculating Coefficient of Cross Elasticity of Demand
5.4.6 Summary of the signs of the Coefficient of Income Elasticity of Demand
5.4.7 Classification of Cross Elasticity of Demand
CONSUMER BEHAVIOUR
6.1 OVERVIEW OF CONSUMER BEHAVIOUR
6.2 CARDINAL UTILITY APPROACH
6.2.1 The law of diminishing marginal utility
6.3 THE ORDINALIST’S APPROACH/INCOME AND SUBSTITUTION EFFECTS
6.3.1 Overview of income and substitution effect
Objectives & Thematic Focus
This textbook aims to provide a fundamental understanding of microeconomics, specifically tailored for business students. It addresses the core mechanisms of resource allocation and decision-making by individuals, firms, and governments, with a specific focus on the Ghanaian context. The research aims to clarify how scarcity necessitates choice and how various economic systems manage this challenge through demand and supply.
- Foundational economic concepts: Scarcity, choice, and opportunity cost.
- Comparative analysis of economic systems: Traditional, capitalist, socialist, and mixed economies.
- Dynamics of demand and supply: Factors affecting demand/supply and equilibrium price determination.
- Elasticity theory: Price, income, and cross elasticity of demand.
- Consumer behavior: Cardinal and ordinal utility approaches, including income and substitution effects.
Excerpt from the Book
1.1 INTRODUCTION
The word economy comes from the Greek word ‘oikonomos’, which means “one who manages a household.” At first, this origin might seem peculiar. But in fact, households and economies have much in common. A household faces many decisions. It must decide which members of the household do which tasks and what each member gets in return: Who cooks dinner? Who does the laundry? Who gets the extra dessert at dinner? Who chooses what TV show to watch? In short, the household must allocate its scarce resources among its various members, taking into account each member’s abilities, efforts, and desires.
Like a household, a society faces many decisions. A society must decide what jobs will be done and who will do them. It needs some people to grow food, other people to make clothing, and still others to design computer software. Once society has allocated people (as well as land, buildings, and machines) to various jobs, it must also allocate the output of goods and services that they produce. It must decide who will eat caviar and who will eat potatoes. It must decide who will drive a Ferrari and who will take the bus. The management of society’s resources is important because resources are scarce.
Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have. Just as a household cannot give every member everything he or she wants, a society cannot give every individual the highest standard of living to which he or she might aspire.
Summary of Chapters
OVERVIEW OF ECONOMICS: This chapter defines the core problem of scarcity and introduces essential concepts like opportunity cost and the production possibility curve.
ECONOMIC SYSTEMS AND THEIR FUNCTIONS: It categorizes and compares different global economic systems, highlighting how each handles resource allocation and production.
DEMAND AND SUPPLY: This chapter explores the determinants of demand and supply and explains how these forces influence market equilibrium.
PRICE DETERMINATION: The text discusses how prices are set in various market conditions, including government intervention and free market interactions.
ELASTICITY OF DEMAND AND SUPPLY: It introduces mathematical methods for measuring the responsiveness of demand and supply to price and income changes.
CONSUMER BEHAVIOUR: This section examines the theories behind rational consumer choices, including marginal utility and income/substitution effects.
Keywords
Microeconomics, Scarcity, Opportunity Cost, Production Possibility Curve, Economic Systems, Capitalist Economy, Socialist Economy, Mixed Economy, Demand, Supply, Equilibrium Price, Elasticity, Consumer Behavior, Marginal Utility, Income Effect.
Frequently Asked Questions
What is the primary focus of this work?
The book focuses on the fundamental principles of microeconomics, providing a foundation for students in business and related fields, with a specific focus on the Ghanaian economic landscape.
What are the core thematic areas covered?
Key areas include the basics of resource allocation, comparison of economic systems, the mechanics of demand and supply, price determination, various types of elasticity, and the analysis of consumer behavior.
What is the primary goal of the author?
The author intends to demystify complex economic concepts for tertiary-level students, enabling them to apply economic principles to real-world business and everyday problems.
Which scientific methods are utilized?
The work uses economic modeling, mathematical functions for elasticity, and graphical analysis of demand and supply curves to explain theoretical concepts.
What does the main body of the work entail?
The main body systematically progresses from defining economics to analyzing market systems, price determination, consumer behavior theories, and the mathematical measurement of responsiveness (elasticity).
Which keywords best characterize this book?
The book is defined by keywords such as Scarcity, Opportunity Cost, Market Equilibrium, Elasticity, and Consumer Behavior.
How does the author explain the paradox of value?
The author uses the cardinal utility approach to distinguish between the total utility and the marginal utility of goods like gold and water, explaining that gold has a higher price due to higher marginal utility despite being less "essential" than water.
What role does the "central planning committee" play in socialist economies?
In a socialist system, this committee is responsible for fixing prices, determining resource allocation, and deciding what, how, and for whom to produce, replacing the market's "invisible hand."
How does the book describe the importance of the study of economics to households?
It emphasizes that economics helps individuals maximize satisfaction from limited resources and recognize the value of saving for future consumption and overall national prosperity.
- Citar trabajo
- Frank Opuni (Autor), 2017, Fundamentals of Microeconomics. Key Essentials of Demand and Supply Analysis, Múnich, GRIN Verlag, https://www.grin.com/document/378728
