Microeconomics: Difference between revisions
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==The basic models of microeconomics== | ==The basic models of microeconomics== | ||
===Production Possibilities Curves=== | ===Production Possibilities Curves=== | ||
The production possibility curves is a hypothetical representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other. The curve is used to represent a society’s choice between two different goods. A society can use up all its potential resources producing a lot of butter and no guns at all. Or can use most of its resources producing guns and no butter. Between those to extremes there are infinite combinations of production of guns and butter that can be choosed by society. <ref name=PRODUCPOSSIB>[http://krypton.mnsu.edu/~renner/ppc.htm Production Possibility Curves]</ref> | |||
===Demand Functions and Demand Curves=== | ===Demand Functions and Demand Curves=== | ||
Revision as of 12:34, 1 April 2007
- <This article is under construction>
Microeconomics is the branch of Economics that studies the behavior of units called "economic agents". Microeconomic models investigate assumptions about "economic agents" activities and about interactions between these agents. An "economic agent" is the basic unit operating in the model. Most often, we do have in mind that the "economic agent" is an individual, a person with one head, one heart, two eyes, and two ears. However, in some economic models, an economic agent is taken to be a nation, a family, or a parliament. At other times, the "individual" is broken down into a collection of economic agents, each operating in distinct circumstances and each regarded as an economic agent. When we construct a model with a particular economic scenario in mind, we might have some "degree of freedom" regarding whom we take to be the "economic agents". [1]
Those economic models are instruments or "tools" which help economists better understand the economic reality. As reality is too complex, and has infinite variables - that cannot be analysed simultaneoulsy - those models make simplifying assumptions about real life. We could compare economic models to geographical maps: the models create a "map" of the economic reality the same way a map creates a conventional representation of a country. As with maps, no information will come out of an economic model unless it had been previously incorporated in the model by the researcher; this information will only be presented in a more comprehensive manner. It is important to fully understand all the "assumptions" which lie behind any economic model in order to rationally understand their results.
The basic models of microeconomics
Production Possibilities Curves
The production possibility curves is a hypothetical representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other. The curve is used to represent a society’s choice between two different goods. A society can use up all its potential resources producing a lot of butter and no guns at all. Or can use most of its resources producing guns and no butter. Between those to extremes there are infinite combinations of production of guns and butter that can be choosed by society. [2]