Me With Micro Economics

What is microeconomics?

Microeconomics is considered the starting point of Macroeconomics, and deals with individual and small business economic decisions. These individual decisions, in aggregate, affect the demand and supply of goods and services throughout the entire economy.One of the most commonly analyzed topics in microeconomics is the model of supply, demand and equilibrium. Under this model, the producers and consumers of a good determine how its price and quantity is traded between them.  In a free market, the price of goods will vary until it hits an equilibrium point, which is defined as the point at which the total quantity of goods demanded equals the quantity of goods supplied. Using the model of supply and demand, economists are able to understand how individuals will price their goods and allocate their limited resources in the most efficient way.Supply and DemandSupply and demand are the most fundamental tools of economic analysis. Many topics and economic reasoning involve supply and demand in one form or another. So what is supply and demand?Let's look at a simple example. In the winter, the cold causes you to heat your house for more hours than you would in other months. This is likely true not just for you, but for all of your neighbors as well. As a result, demand for heat is higher. Because demand is higher, gas companies can charge more for gas.Similarly, an oil spill from a tanker, bad weather, or war in the Middle East may often create a short-term gas shortage, which is a reduction in supply and can affect the price you pay also.ElasticityElasticity is used to help determine the change in consumer demand (how much you want of something) as a result of a change in the good's price. When a good or service is elastic, this suggests that the demand for the good or service is affected by a change in price, whereas something that is inelastic is insensitive to price.An example of an elastic good may be an apple. If the price of apples goes up, you most likely will think about switching to a different fruit that is cheaper. The demand for the fruit will go down.A couple of examples of inelastic goods are baby formula and electricity. Even if the price goes up, you will most likely keep buying them. Businesses often strive to sell products or services that are, or seem, inelastic in demand because doing so can mean that few customers will be lost if they raise prices.

Is macro and micro economics hard?

For me I feel that work starts from basic cause i.e at individual level. So first we have to study at basic human level and study what they want. To do that we need to consider each and every aspect of the model, we have to take each assumption to make it free from all criticism. Hence micro economics is a bit hard were as in macro economics we take a group of people and decide they general policy in a more general way. Hence macro leave a bit easy to get for an individual rather than micro.But once you get the basic difference in assumption you will be in love with both!P.S- do not mess with any of the two if you are not interested in economics.

What has more math, micro or macroeconomics?

Micro has both less and more math than macroeconomics. The reason is that microeconomics can roughly be split into applied and theory. Applied microeconomics uses statistical causal inference techniques or experimental designs to study and explain economic phenomena. This is probably the minimal level of math required in economics, as it only requires a good intuitive understanding of statistical techniques. Theoretical microeconomics, however, uses mathematics from all over the place. Fields that fall under micro theory include game theory, decision theory, networks, and auction/market design, although all of these fields have their uses in applied work. At the bare minimum, you need a good understanding of measure-theoretic probability, and depending on your research, you might need graph theory, stochastic processes, and fixed point theorems (this list is non-exhaustive).Macroeconomics can also be split into applied and theory, but my impression is that applied macro is a bit more mathematical than applied micro, but theoretical macro is a bit less mathematical than micro theory. The reason why applied macro is a bit more mathematical is that data available for macro-level questions often include additional statistical problems that applied microeconomists can often ignore. Theoretical macro generally requires a good understanding of calculus-based probability, dynamic optimization, and numerical methods. Much of this math can be learned through an undergraduate math degree with some basic graduate-level math, although the degree of rigor required is not very high. In contrast, papers from micro theorists pretty much read like actual math papers. Another reason why theoretical macro is less mathematical is that researchers aren’t concerned about proving general theorems in macro theory. Most macro theory models are tailored to fit a particular economic phenomena, so any results proven are not easily extrapolated to other settings. Moreover, the level of proofs required are fairly simple and can be understood by an undergrad math major.

What are the key aspects of microeconomics?

If you want to do Microeconomics, you need 3 things:A set of “agents”: A distinct set of people who may or may not be different from each other.Each agent has a preference: everyone in this world has a goal and wants something (maximize happiness, minimize the pain they experience…)There are set rules on how they can interact with each other: they have to use money, they have to exchange good in a market set price, or any other market mechanisms from an auction to even random matching.Microeconomics defines these situations and builds from there to answer how agents (people) interact with each other under those specific circumstances.So, the key aspects of microeconomics is:How the agents’ preference is defined. What are the choices they’re considering? Can they compare between those choices? Are there anything weird about how they’re choosing?What are they trying to achieve? What about a choice that makes it more preferred than others?How are they choosing? What specific rules and mechanisms are in place?I know it sounds broad, so let me give you an example.Imagine you’re a university student who have to choose between courses to register in. The agents in this “market” are students (and arguably the administrators who schedule the courses and the profs who teach them.) What do they want? Well, you may want to satisfy your credit requirement, but your friend might be very adamant about choosing a course with a specific Professor.And the key thing is, you can’t have a free reign on how you choose your courses. You may be assigned a registration slot, you may be constrained by the class size or other program requirements, you may have some scheduling conflicts.Let’s recap:Agents: Students trying to registerWhat they want: Graduate/Get an education/Other reasonsHow they have to do it: Using the registration system by their universityThrough analyzing this “market”, economists can learn:Whether everyone’s objectives are satisfiedWhat happens if we tweak some of the mechanismsThat second part is key, because then it guides policy design and how you can design markets to improve its functions.

What are some examples of microeconomics?

Microeconomics (price theory) concerns itself with changes in quantity demanded, caused by price changes, and other, less influential determinants.For most products, we buy more as price falls, fewer units if price rises. Micro seeks to answer why this is so, and by how much quantity demanded changes, when price changes.Likewise, as price rises, more is supplied, as it fall, less is supplied. There will be a point at which quantity demanded intersects quantity supplied. This is the ‘market clearing price’.Typically, micro looks at one product or service at a time, and tries to find the price / quantity relationship in terms of price elasticity, or lless frequently, income elasticity and even cross elasticity.There are other determinants of demand beyond price, like income, tastes or preferences, and the prices of substitutes or complements for the good or service in question.In micro, we try to analyse ,separate out, and understand, how price, income and substitution interact with changes in quantity demanded.At a higher level, moving closer to macroeconomics, changes in demand (as opposed to changes in quantity demanded) are explored as well.A change in demand means that at all prices, quantity demanded changes. This is called a shift in demand.