We now move from our introductory survey to a detailed stud,’ of microeconomics-of the behavior of individual firms. consumers and markets. Individual markets contain much of the grand sweep and Hamas of economic history and the controversies of economic policy. Within the confines of microeconomics we will study the reasons for the vast disparities in earnings between neurosurgeons and textile workers. Microeconomics is crucial to understanding why computer prices have fallen so dramatically and why the use of computers has expanded exponentially. We cannot hope to understand the bitter debates about health care or the minimum wage without applying the tools of supply and demand. to these sectors. Even topics such as illegal drugs or crime and punishment are usefully illuminated by considering the way the demand for
addictive substances differs from that for other commodities.
But understanding supply and demand requires more than simply parroting the words.A full mastery of microeconomics analysis means understanding the derivation of demand curves and supply curves. learning about different concepts of costs. and understanding how perfect competition differs from monopoly. All these and other key topics will be our subjects as we tour through the fascinating world of microeconomics.
Our survey of microeconomics begins with an analysis of product markets for goods and services. We will examine where consumer demand , comes from. how businesses make decisions, and how prices and profits coordinate the allocation of resources in a competitive market We will also examine the market failures that arise when monopolies or other forms of imperfect competitors dominate industry, In subsequent parts. we will examine factor market and the role of government in a modern mixed economy.
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