https://teddyrookbook.com/economics/microeconomics/Recent content in Microeconomics on Teddy Rook Bookhttps://teddyrookbook.com/img/share.jpghttps://teddyrookbook.com/img/share.jpgHugoenhttps://teddyrookbook.com/economics/microeconomics/scarcity-resources/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/scarcity-resources/Wants outrun resources, so land, labor, capital and entrepreneurship must be rationed somehow. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/opportunity-cost/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/opportunity-cost/The cost of a choice is the value of the best alternative you give up, including your time. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/positive-normative/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/positive-normative/A positive statement can be checked against facts; a normative statement says what ought to be. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/economic-systems/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/economic-systems/Markets, command and tradition each answer what to make, how to make it and who gets it; real economies mix them. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/budget-constraint/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/budget-constraint/A budget line shows every affordable combination of two goods, and its slope is an opportunity cost. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/ppc/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/ppc/Points on the curve are efficient, points inside waste resources, and points outside cannot be produced yet. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/ppc-opportunity-cost/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/ppc-opportunity-cost/A straight PPC means constant opportunity cost; a bowed-out PPC means the cost rises as you make more. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/ppc-shifts/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/ppc-shifts/More resources or better technology push the curve out; idle resources put the economy at a point inside it. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/comparative-advantage/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/comparative-advantage/Comparative advantage goes to whoever gives up less of the other good, not to whoever makes more. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/gains-from-trade/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/gains-from-trade/Trade helps both sides when the price lies between the two producers' opportunity costs. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/marginal-analysis/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/marginal-analysis/Keep going while the next unit's benefit is at least its cost; money already spent should not change the choice. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/marginal-utility/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/marginal-utility/Each extra unit usually adds less satisfaction than the one before it. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/utility-maximizing-rule/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/utility-maximizing-rule/Spend so the last dollar on each good adds the same utility: MUx/Px = MUy/Py. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/law-of-demand/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/law-of-demand/Other things equal, a higher price means a smaller quantity demanded. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/demand-equations/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/demand-equations/Q = 20 − 2P and P = 10 − Q/2 describe the same demand curve, drawn with price on the vertical axis. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/demand-shift-vs-movement/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/demand-shift-vs-movement/A change in the good's own price moves along the curve; any other change in buying plans shifts the whole curve. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/demand-shifters/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/demand-shifters/Tastes, income, expectations and the number of buyers shift demand; more income raises demand for normal goods and lowers it for inferior goods. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/substitutes-complements/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/substitutes-complements/A higher price for coffee raises demand for tea (a substitute) and lowers demand for coffee filters (a complement). Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/law-of-supply/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/law-of-supply/Other things equal, a higher price brings a larger quantity supplied, because extra units cost more to make. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/supply-shifters/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/supply-shifters/Input prices, technology, taxes and subsidies, expectations and the number of sellers shift supply. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/market-equilibrium/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/market-equilibrium/The price where quantity demanded equals quantity supplied, found on a graph or by setting the two equations equal. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/shortage-surplus/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/shortage-surplus/Below the equilibrium price there is a shortage, above it a surplus, and each pushes the price back toward equilibrium. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/equilibrium-changes/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/equilibrium-changes/Decide which curve shifts and which way, then read the new equilibrium price and quantity. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/double-shifts/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/double-shifts/With two shifts, either price or quantity changes in a definite direction and the other depends on which shift is larger. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/price-elasticity-demand/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/price-elasticity-demand/Divide the percent change in quantity demanded by the percent change in price, using the midpoint method. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/elasticity-determinants/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/elasticity-determinants/Close substitutes, luxuries, a large share of the budget and more time to adjust all make demand more elastic. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/total-revenue-test/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/total-revenue-test/A higher price raises revenue only when demand is inelastic; revenue is largest where demand is unit elastic. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/price-elasticity-supply/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/price-elasticity-supply/Supply is more elastic when firms have time, spare capacity and easy access to inputs. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/income-cross-elasticity/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/income-cross-elasticity/The sign tells the story: normal or inferior goods for income elasticity, substitutes or complements for cross-price elasticity. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/consumer-producer-surplus/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/consumer-producer-surplus/Buyers gain the gap between what they would pay and the price; sellers gain the gap between the price and their cost. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/deadweight-loss/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/deadweight-loss/A competitive market with no spillovers maximizes total surplus; trading too little or too much loses some of it. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/price-controls/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/price-controls/A binding ceiling sits below equilibrium and causes a shortage; a binding floor sits above it and causes a surplus. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/excise-tax/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/excise-tax/A tax drives a wedge between the price buyers pay and the price sellers keep, raising revenue and causing a deadweight loss. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/tax-incidence/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/tax-incidence/The less elastic side of the market bears more of a tax, no matter who sends the money to the government. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/subsidies/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/subsidies/A subsidy lowers the price buyers pay, raises the price sellers get, costs taxpayers money and leads to more than the efficient quantity. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/world-price/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/world-price/When a country opens to trade, the world price decides whether it imports or exports, and who gains and who loses. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/tariffs-quotas/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/tariffs-quotas/A tariff or quota raises the domestic price, helps domestic producers, costs consumers more and creates deadweight loss. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/economic-profit/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/economic-profit/Economic profit subtracts implicit costs too, so zero economic profit is a normal return. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/production-function/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/production-function/Adding workers to a fixed plant eventually adds less output each time: diminishing marginal returns. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/short-run-costs/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/short-run-costs/Fixed, variable and total cost, and the average and marginal costs computed from them. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/cost-curves/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/cost-curves/Marginal cost crosses average variable cost and average total cost at their lowest points. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/cost-shifts/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/cost-shifts/A change in fixed cost, such as a license fee or lump-sum tax, moves only ATC and AFC; a change in variable cost moves MC, AVC and ATC. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/long-run-costs/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/long-run-costs/In the long run every input can change; average cost may fall, stay flat, then rise as the firm grows. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/price-takers/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/price-takers/Many sellers of an identical product each face a flat demand curve at the market price, so P = MR. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/profit-maximizing-output/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/profit-maximizing-output/Produce every unit whose marginal revenue covers its marginal cost, and stop where MR = MC. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/profit-and-loss/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/profit-and-loss/Profit equals (P − ATC) × Q, a rectangle between the price and average total cost. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/shutdown-rule/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/shutdown-rule/In the short run, keep producing if price covers average variable cost, even at a loss. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/long-run-competition/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/long-run-competition/Profits draw new firms in and losses push firms out until price equals minimum average total cost. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/efficiency/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/efficiency/Allocative efficiency means P = MC; productive efficiency means producing at minimum ATC. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/monopoly-sources/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/monopoly-sources/Economies of scale, legal protection such as patents, control of a key resource and network effects can keep rivals out. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/monopoly-marginal-revenue/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/monopoly-marginal-revenue/To sell one more unit, a single-price seller must lower the price on every unit, so MR < P. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/monopoly-price-output/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/monopoly-price-output/Find the quantity where MR = MC, then go up to the demand curve to read the price. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/monopoly-inefficiency/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/monopoly-inefficiency/A monopoly sells less at a higher price than a competitive market would, so P > MC and some surplus is lost. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/natural-monopoly/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/natural-monopoly/When one firm can serve a market most cheaply, regulators may set P = MC (efficient but loss-making) or P = ATC (a fair return). Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/price-discrimination/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/price-discrimination/Charging different buyers different prices for the same good can raise both output and profit while shrinking consumer surplus. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/monopolistic-competition/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/monopolistic-competition/Many firms with differentiated products earn zero economic profit in the long run and have excess capacity. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/dominant-strategies/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/dominant-strategies/A dominant strategy is a player's best choice no matter what the other player does. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/nash-equilibrium/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/nash-equilibrium/In a Nash equilibrium no player can do better by changing alone, which is why cartels are hard to hold together. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/marginal-revenue-product/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/marginal-revenue-product/Hire workers until the marginal revenue product of the last one equals the wage. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/factor-market-shifts/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/factor-market-shifts/Product prices, productivity and other inputs shift labor demand; population, preferences and pay elsewhere shift labor supply. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/least-cost-rule/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/least-cost-rule/Use inputs so the last dollar spent on each adds the same output: MPL/w = MPK/r. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/monopsony/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/monopsony/A single buyer of labor must raise the wage for everyone to hire one more worker, so it hires fewer workers at a lower wage. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/negative-externalities/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/negative-externalities/When a cost spills onto bystanders, the market produces more than the efficient amount. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/positive-externalities/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/positive-externalities/When a benefit spills onto bystanders, the market produces less than the efficient amount. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/externality-policy/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/externality-policy/A per-unit tax equal to the marginal external cost, a subsidy, tradable permits or direct rules can move output toward the efficient amount. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/types-of-goods/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/types-of-goods/Private goods, public goods, common resources and club goods differ in whether people can be kept out and whether one person's use leaves less for others. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/public-goods/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/public-goods/Because no one can be kept from using a public good, people can ride free, and markets tend to supply too little. Microeconomics · Economics Ladderhttps://teddyrookbook.com/economics/microeconomics/income-inequality/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/microeconomics/income-inequality/The Lorenz curve and the Gini coefficient show how evenly income is shared. Microeconomics · Economics Ladder