Microeconomics Made Easy

Behavior, Decisions and Choices

Microeconomics is fun!

Microeconomics is about the behavior, decisions and choices of individual actors. There are four main parts of microeconomics:

Individual Behavior

Supply and Demand

Theory of the Firm

Competition

There are two main assumptions made in classical economics:

1. that we are rational actors and we always optimize our allocation decisions
2. Resources are scarce and allocating them in the most efficient manner is critical

Both these assumptions are being challenged with more nuanced thinking.

Individual Behavior

In classical economics we are completely rational like Spock when it comes to our purchasing decisions and budget allocations.

Our behavior is graphically represented by a budget constraint line and our preference curve. We optimize our buying power relative to our preferences where the two meet…