Microeconomics

Economics:  is the social science addressing the allocation of resources among alternative uses

1) Microeconomics: is the study of individual economics units in the economy (exp. Consumer, Firm).

The study of microeconomics includes:

a) Demand                        b) Elasticity                                     c) Utility Theory                   d) Supply

e) Market equilibrium      f) Production & cost of resources    g) Market structure 

Unit 1 :Factors Affecting  The Firm

A) Demand ( Consumer side )

Is the Quantities of goods or services that consumers are willing and Able to buy at various prices.

The law of Demand: The price of the product is inversely (negatively) related to the quantity demanded of that same product. Holding all other determinants (other than the goods price) constant

Demand Curve: Is the graphical presentation of the demand schedule

Reasons of inverse relationship between P,QD

Substitution Effect   : When p ↑   people would substitute the good with substitutive cheaper goods and vice versa   .

Ex .Your salary is $500 and you allocate $100 for proteins (20Kg) and you always buy beef which is $5 per Kg , if the price of meat increase to $ 10 , of course you will go for the substitute product which is chicken that costs $4 to keep your consumption on the same level . So as the price of beef increase consumer substitute beef for chickens .  ( as   price increase , quantity demanded decrease)

Income Effect  : Assuming Constant income ,  When p ↑   people spend more automatically and income is  rapidly exhausted

If we revert to our previous  example but assuming that there was no substitute for beef  , so if  beef  price ↑   , consumer has nothing to do except to consume less quantity .

Demand factors ( Determinants ) :- ( Assuming Price  constant )

1- Consumer Income

Superior goods ( normal  goods )

Inferior goods   

2- Prices of related goods

  Substitutes goods  

Complementary goods

3- Consumers taste and preferences.

4- Consumers future expectation (Income, Prices).

5- Number of consumers.