Principles of Microeconomics 3e OpenStax

Each chapter begins with a real world economic example or question in “Bring it Home” section, and it also ends with a detail explanations related to the examples or questions in “Bring it Home”. This layout is scope of micro economics efficient and helpful for students to catch up the application of the chapter content. Key terms, concepts and summary at the end of each chapter are also useful to help student better catch the main points. The textbook covers all of the sections that are expected for a principles class. Further extensions into financial markets, income inequality, and political economy are covered well. Further, the authors introduce consumer, producer, and social surplus but neglect to tie these concepts to deadweight loss and market inefficiencies in subsequent chapters.

Consumer demand theory

The opportunity cost of eating waffles is sacrificing the chance to eat chocolate. Because the cost of not eating the chocolate is higher than the benefits of eating the waffles, it makes no sense to choose waffles. Of course, if one chooses chocolate, they are still faced with the opportunity cost of giving up having waffles. But one is willing to do that because the waffle’s opportunity cost is lower than the benefits of the chocolate.

He specializes in using statistics in investing, technical analysis, and trading. This relates to the determination of payments for the various factors of production, such as rent, wages and profits, in terms of marginal productivity, reward for risk-taking etc. But in contemporary times, it is impossible to study Economic Theory without knowledge of Mathematical Techniques such as geometry, algebra, calculus, set theory, and matrices. This definition established the character of the subject for a long time to come. Economics studies human beings as they go about their everyday life.

How Important Is Microeconomics in Our Daily Life?

Microeconomics may look at the incentives that influence individuals to make certain purchases, how they seek to maximize utility, and how they react to restraints. Utility refers to the degree of satisfaction that an individual receives when making an economic decision. The concept is important because decision-makers are often assumed to seek maximum utility when making choices within a market.

1. Microeconomics examines the behavior of individual economic units such as consumers and firms, while macroeconomics studies the economy as a whole, focusing on aggregate variables like national income, inflation, and unemployment.
2. For example, one may like waffles, but like chocolate even more.
3. In the second half of the 18th century, there emerged economic thoughts that go by the name Physiocracy.
4. As one of the two branches of the study of economics, an understanding of microeconomics and how it relates to the other branch, macroeconomics, is critical.

Moreover, the authors’ 2021 revision adds many contemporary and timely examples such as Covid -19 and 2020 USA election. The text starts with the fundamental concepts that are typically covered in a Principles of Microeconomics course and builds off of them nicely as it progresses through the topics. If the instructor finds the structure doesn’t necessarily follow the way they would normally address the topics, the textbooks modularity makes it easy for them to organize it in a way that works for them. However, I want to point out that the graphs in Chapter 3 are little bit messy, especially on Page 53.

Understanding Microeconomics

I did not find any inconsistencies in the text–i think the framework of each chapter is clear, fits well within the overall structure, and the materials have a logical and consistent ordering. Except for the super-minor labour v. labor inconsistency, I did not identify inconsistency in terms of terminology and/or framework. For a company to enter into a market, some barriers to entry exist because of government intervention or from the free market.

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. There were only very few (very minor) errors spotted throughout the book, but nothing that would distract or keep students from using the textbook.

When it comes to the core issues covered, the textbook is again relevant and the longevity issue becomes much less of a concern. Story telling format; the reader is provided with fundamental economic realities in the world using examples that are relevant to people in general. The foundational concepts are discussed before the math and graphs are introduced hence the reader has already seen the “what’s in it for me” reality.

That is, the higher the price of a product, the less of it people would be prepared to buy (other things unchanged). As the price of a commodity falls, consumers move toward it from relatively more expensive goods (the substitution effect). In addition, purchasing power from the price decline increases ability to buy (the income effect). Other factors can change demand; for example an increase in income will shift the demand curve for a normal good outward relative to the origin, as in the figure. All determinants are predominantly taken as constant factors of demand and supply. The link between personal preferences, consumption and the demand curve is one of the most closely studied relations in economics.

Firms in perfect competition are “price takers” (they do not have enough market power to profitably increase the price of their goods or services). A good example would be that of digital marketplaces, such as eBay, on which many different sellers sell similar products to many different buyers. Consumers in a perfect competitive market have perfect knowledge about the products that are being sold in this market. Supply is the relation between the price of a good and the quantity available for sale at that price. It may be represented as a table or graph relating price and quantity supplied. Producers, for example business firms, are hypothesized to be profit maximizers, meaning that they attempt to produce and supply the amount of goods that will bring them the highest profit.