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Microeconomics - Term Paper Example

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Macroeconomics and microeconomics are the two branches of economics. The basic elements of the economy are the main concerns in microeconomics. The…
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Microeconomics
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Download file to see previous pages The various market structures that are discussed within microeconomics are perfect competition, monopoly, monopolistic competition, and oligopoly. One of the objectives of microeconomics is to analyze the mechanisms of market. Microeconomics sets up the relative prices amongst the services and the goods and allocates the available amount of limited resources among the alternative uses. Some of the significant fields of study under this branch of economics include asymmetric information, general equilibrium, game theory and choices under uncertainty.
All wealth that fulfills the wants of consumers constitutes the wealth of a nation. Therefore, the aim behind expanding wealth is broadening the choices of the consumers in terms of quality, quantity and variety. Economists are involved in researches on the idea of free market with socially optimal allocation. The notion of competition constitutes the central part of economic theory.
The objects of the choices available to the consumer are called the consumption bundle. The consumer has the objective of maximizing the well being. They are well informed about the availability of the goods in the market and desires variety in their consumption bundle. There are two sets of consumption bundles (x1, x2) and (y1, y2). The consumer ranks the availabilities according to their affordability. When the consumer is just satiated consuming the bundle of x goods as compared to the satisfaction he would have earned consuming the other bundle of y goods, according to his own preferences, then it is said that the consumer is indifferent. The axioms of consumer theory are complete, reflexive and transitive (Samuelson, 1956. p.3).
The two axes represent a typical consumption pattern of goods 1 and 2. A consumption bundle (x1, x2) is offered along with the other bundles of consumption that are weakly preferred to the selected bundle. The other consumption bundles are called the weakly preferred sets. The indifference ...Download file to see next pagesRead More
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