Microeconomics – Consumers, Producers & Efficiency of Markets

WELFARE ECONOMICS Welfare economics is the study of how the allocation of resources affects economic well-being. Participation in market leads to buyers receiving benefit consumer surplus and sellers receiving benefit producer surplus. Equilibrium maximises total welfare. CONSUMER SURPLUS Willingness to pay measures the buyers’ value of a good or service as the maximum amount that … Continue reading Microeconomics – Consumers, Producers & Efficiency of Markets

Microeconomics – Application & International Trade

EQUILIBRIUM WITHOUT INTERNATIONAL TRADE Assume: an isolated country only produces steel. Imports and exports of steel are prohibited. Results: domestic price adjusts to clear market. The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive. If country begins international trade, will it be an importer or exporter of steel? … Continue reading Microeconomics – Application & International Trade

Microeconomics – Elasticity & Its Applications

Elasticity measures how much buyers and sellers respond to changes in market conditions. Price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Determinants … Continue reading Microeconomics – Elasticity & Its Applications

The 4 Properties of Indifference Curves

The four properties of indifference curves: Higher indifference curves are preferred to lower ones; Indifference curves are downward sloping; Indifference curves do not cross; Indifference curves are bowed inwards; 1st property – Higher indifference curves are preferred to lower ones This is true because consumers usually prefer more of something to less of it. Where … Continue reading The 4 Properties of Indifference Curves