6. Fundamental Concepts of
Microeconomics
1.
2.
3.
4.
5.
Objectives and Methods of Microeconomics
The Consumer
The Firm
The Market
Basic Issues in Welfare Economics
6.1 Objectives and Methods of
Microeconomics
Art Work 1: David Dalla Venezia, No. 269, Oil on Canvas, 2000
Conflict resolution and Coordination
Art Work 2: Theater Bonn, Germany, FRIDA KAHLO, 2003. Photo: Thilo Beu.
6.2 The Consumer
Fig. 6.1 The Individual Demand Curve
Increasing Income
Fig. 6.2 Comparative Static Analysis of Demand as Income Increases
6.3 The Firm
Fig. 6.3 Equilibrium Output Decision of a Perfectly Competitive Firm
Equilibrium Supply
Fig. 6.4 Equilibrium Supply for Alternative Prices
Supply Curve
Fig. 6.5 The Supply Curve of the Firm
Comparative Statics of Supply
Fig. 6.6 Comparative Static Analysis of the Individual Supply Curve
6.4 The Market
Fig. 6.7 Deriving the Market Demand Curve
by Horizontal Aggregation of the Individual Demand Curves
Market Supply
Fig. 6.8 Deriving the Market Supply Curve
by Horizontal Aggregation of Individual Supply Curves
Market Equilibrium
Fig. 6.9 Market Equilibrium
Comparative Statics of Equilibrium
Fig. 6.10 Comparative Static Analysis of the Market Equilibrium
6.5 Basic Issues in Welfare Economics
Fig. 6.11 Socially Optimal and Perfectly Competitive Level of Production
Inter-firm Allocation
Fig. 6.12 Cost-effective inter-firm Allocation
Inter-consumer Allocation
Fig. 6.13 “Benefit-effective” Inter-consumer Allocation
Market Failure
Fig. 6.14 Market Failure due to Negative Externalities