Many colleges include an introduction to principles of microeconomics in their core curriculums. Additionally, many principles of microeconomics courses are prerequisites for more advanced studies in business and economics. Principles of microeconomics classes focus on small unit decision making when trying to use finite resources. The small units that are typically analyzed are individuals or households (consumers of goods and services) and firms (producers of goods and services).
More specifically, principles of microeconomics develops theories about how individuals make decisions to satisfy their wants with the finite resources they have available to spend, and about how firms make decisions on what to produce with their finite resources like capital and labor, in order to maximize profits. Additionally, principles of microeconomics includes the study of government policy and its effect on the behavior of individuals and firms.
Some of the key concepts in principles of microeconomics include: supply and demand, elasticity, opportunity cost, consumer choice, efficient markets, rational self interest, pricing and output, comparative advantage, competition, monopoly, regulation, and antitrust. For example, “opportunity cost” is a concept that compares what an individual must give up, in return for getting what he wants. So, if the individual wants a fancy sports car, which costs more than a mid-level sedan, he will have to eat out at fancy restaurants less often and instead eat more meals at home that cost less. The decrease in eating out at fancy restaurants is the opportunity cost for purchasing the fancy sports car.
A typical principles of microeconomics course will also delve into the tools that economists use to study the behavior of the individuals and firms, such as modeling, graphing, positive and normative analyses, and the “everything else being equal” assumption. For example, graphing is used to show how supply and demand may look along the spectrum of changing prices and quantities. In general, demand will be highest at the lowest ends of the price scale, while supply will be highest at the highest end of the price scale. The reasons for this are obvious, more households will buy any given item when the price is lower – that is called demand. Conversely, more firms will produce any given item when the prices they can sell it at are higher – that is called supply. Where the two lines of supply and demand intersect at a price point is called the equilibrium price.
Some of the most widely used textbooks for principles of microeconomics classes are as follows:
Microeconomics by Robert Pindyck, Microeconomics by David Colander, Microeconomics by James D. Gwartney, Microeconomics by Roger A. Arnold, Microeconomics by Paul Krugman, Principles of Microeconomics by N. Gregory Mankiw, Economics : Micro by William A. McEachern, and Modern Principles : Microeconomics by Tyler Cowen and Alex Tabarrock.
Many of the widely used textbooks have study guides or notes available to assist in further study. Principles of microeconomics notes are helpful for anyone wishing to have condensed, easy to use study guides based on the material covered in the texts and lectures.
