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An introduction to the field of microeconomics, focusing on the definition, key concepts, and research methods. It covers the distinction between microeconomics and macroeconomics, the circular flow diagram, and the concept of optimal choice based on marginal benefits and marginal costs. The document offers a comprehensive overview of the fundamental principles and analytical tools used in microeconomic analysis, making it a valuable resource for students and researchers interested in understanding individual decision-making and the functioning of specific markets within the broader economic system.
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Economics is the study of managing society's scarce resources. Microeconomics focuses on the individual parts of the economy, such as how households and firms make decisions and how they interact in specific markets.
Macroeconomics looks at the economy as a whole, examining economy- wide phenomena such as inflation and unemployment. The circular flow diagram illustrates the interactions between households, firms, and the government in the economy.
Positive statements describe the world as it is, known as descriptive analysis. Normative statements prescribe how the world should be, known as prescriptive analysis.
Marginal benefits (MB) is the change in the total benefits of a change in the number of goods or services. Marginal cost (MC) is the change in total cost when there is a change in the number of goods or services.
The optimal choice is to choose option A if the marginal benefit of A (MBA) is greater than the marginal cost of A (MCA).