Microeconomics For Dummies, UK Edition E-Book

Peter Antonioni

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 464

Veröffentlichungsjahr: 2015

Beschreibung

Your one-stop guide to understanding Microeconomics

Microeconomics For Dummies (with content specific to the UK reader) is designed to help you understand the economics of individuals. Using concise explanations and accessible content that tracks directly to an undergraduate course, this book provides a student-focused course supplement with an in-depth examination of each topic. This invaluable companion provides clear information and real-world examples that bring microeconomics to life and introduces you to all the key concepts. From supply and demand to market competition, you'll understand how the economy works on an individual level, and how it affects you every day. Before long, you'll be conversant in consumers, costs, and competition.

Microeconomics is all about the behaviour of individual people and individual firms. It sounds pretty straightforward, but it gets complicated early on. You may not be an economist, but if you're a business student at university, the odds are you need to come to grips with microeconomics. That's where Microeconomics For Dummies comes in, walking you through the fundamental concepts and giving you the understanding you need to master the material.

• Understand supply, demand, and equilibrium
• Examine the consumer decision making process
• Delve into elasticity and costs of production
• Learn why competition is healthy and monopolies are not

Even the brightest business students can find economics intimidating, but the material is essential to a solid grasp of how the business world works. The good news is that you've come to the right place.

Leseprobe

Microeconomics For Dummies®

Published by: John Wiley & Sons, Ltd., The Atrium, Southern Gate, Chichester, www.wiley.com

This edition first published 2014

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Microeconomics For Dummies®

Visit www.dummies.com/cheatsheet/microeconomics to view this book's cheat sheet.

Table of Contents

Cover

Introduction

About This Book

Foolish Assumptions

Icons Used in This book

Beyond the Book

Where to Go from Here

Part I: Getting Started with Microeconomics

Chapter 1: Discovering Why Microeconomics Is a Big Deal

Peering into the Economics of Smaller Units

Making Decisions, Decisions and More Decisions!

Understanding the Problems of Competition and Co-operation

Investigating Why Markets Can Fail

Chapter 2: Considering Consumer Choice: Why Economists Find You Fascinating!

Studying Utility: Why People Choose What They Choose

Modelling Consumer Behaviour: Economic Agents

Pursuing Preferences and Investigating Indifferences

Chapter 3: Looking at Firm Behaviour: What They Are and What They Do

Delving into Firms and What They Do

Considering How Economists View Firms: The Black Box

From Firm to Company: Why People Form Limited Liability Companies

Part II: Doing the Best You Can: Consumer Theory

Chapter 4: Living a Life without Limits

Eating Until You’re Sick! Assuming that More Is Always Better

Deciding How Low You’ll Go! Marginal Utility

Chapter 5: Considering the Art of the Possible: The Budget Constraint

Taking It to the Limit! Introducing the Budget Constraint

Getting the Biggest Bang for Your Buck

Putting the Utility Model to Work

Chapter 6: Achieving the Optimum in Spite of Constraints

Investigating the Equilibrium: Coping with Price and Income Changes

Dealing with Price Changes for One Good

Discerning a Consumer’s Revealed Preference

Decomposing Income and Substitution Effects

Part III: Uncovering the Alchemy of Firms’ Inputs and Outputs

Chapter 7: Working with Different Costs and Cost Curves

Understanding Why Accountants and Economists View Costs Differently

Looking at a Firm’s Cost Structure

Relating Cost Structure to Profits

Chapter 8: Squeezing Out Every Last Drop of Profit

Asking Whether Firms Really Maximise Profits

Going Large! The Goal of Profit Maximisation

Slimming Down! Minimising Costs

Chapter 9: Supplying the Demanded Information on Supply and Demand

Producing Stuff to Sell: The Supply Curve

Giving the People What They Want: The Demand Curve

Identifying Where Supply and Demand Meet

Chapter 10: Dreaming of the Consumer’s Delight: Perfect Competition

Viewing the ‘Perfect’ in Perfect Competition

Putting the Conditions Together for the Perfectly Competitive Marketplace

Examining Efficiency and Perfect Competition

Part IV: Delving into Markets, Market Failure and Welfare Economics

Chapter 11: Stepping into the Real World: Oligopoly and Imperfect Competition

Outlining the Features of an Oligopoly

Discussing Three Different Approaches to Oligopoly

Making Your Firm Distinctive from the Competition

Chapter 12: Appreciating the Fundamental Theorems of Welfare Economics

Getting the Welfare Back into Welfare Economics

Understanding Why Partial Equilibrium Isn’t Enough

Trading Your Way to Efficiency with Two Fundamental Theorems

Chapter 13: Controlling Markets with a Monopoly

Entering the World of the Monopoly

Counting the Costs of Monopolies

Tackling Monopolies in the Real World

‘You Make Me Feel Like a Natural Monopoly’

Chapter 14: Examining Market Failure: Pollution and Parks

Coming to Grips with Externality: Too Much of a Bad Thing

Making the Market Produce What It Won’t: Public Goods

Chapter 15: Understanding the Dangers of Asymmetric Information

Seeing the Effects of Asymmetric Information

Changing Your Behaviour because of Asymmetric Information

Part V: Thinking Strategically: Life Is Just a Game!

Chapter 16: Playing Games with Economic Theory

Setting the Game: Mechanism Design

Locking Horns with the Prisoners’ Dilemma

Looking at Collective Action: The Stag Hunt

Annoying People with the Ultimatum Game

Getting out of the Dilemma by Repeating a Game

Chapter 17: Keeping Things Stable: The Nash Equilibrium

Defining the Nash Equilibrium Informally

Looking for Balance: Where a Nash Equilibrium Must Apply

Applying the Nash Equilibrium in Economics

Chapter 18: Knowing How to Win at Auctions

Spotting Different Kinds of Auction

Bidding for Beginners

Suffering from the Winner’s Curse

Chapter 19: Deciphering the Signals: Threats and Benefits

Refining the Nash Equilibrium to Deal with Threats

Responding to Positive Economic Signals

Part VI: The Part of Tens

Chapter 20: Meeting Ten Great Microeconomists

Alfred Marshall (1842–1924)

Joseph Alois Schumpeter (1883–1950)

Gary S Becker (1930–2014)

Ronald Coase (1910–2013)

Elinor Ostrom (1933–2012)

William Vickrey (1914–96)

George Akerlof (born 1940)

James Buchanan (1919–2013)

William Baumol (born 1922)

Arthur Cecil Pigou (1877–1959)

Chapter 21: Ten Top Tips to Take Away

Respecting Choice

Pricing a Good: Difficult but not Impossible

Competing on Price or Quality

Seeking Real Markets’ Unique Features

Beating the Market in the Long Run is Very Difficult

Knowing a Tradeoff Always Exists Somewhere

Arguing about the Next Best Thing

Using Markets Isn’t Always Costless

Believing that Competition is Good – Usually

Getting Co-operation and Organisation in the World

Glossary

About the Authors

Cheat Sheet

Advertisement Page

Connect with Dummies

End User License Agreement

Guide

Cover

Table of Contents

Begin Reading

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Introduction

Economics is about many things. On one level, it’s concerned with humanity’s struggle to cope with scarcity and how it leads people to make choices about the things that should have priority. On another level, it’s about the human quest for happiness in an uncertain world, and the ways people have found to achieve it. On yet another level, it’s interested in how societies organise themselves from the bottom up, using markets as a way of trading with each other. But however you look at it, economics is a huge subject!

Microeconomics looks at economics on the smallest scales – individuals, consumers, firms – and uses that picture to build up an understanding of how more complicated parts of the world – markets, industries – work. Microeconomics has become a very big subject too, taking in everything from what kinds of decisions people make to the right way to measure and analyse those decisions. It’s the part of economics that’s like looking through a microscope as small creatures go about their business.

So that’s what microeconomists do. The microscope, though, is a bit unusual. It’s not made of glass but of tools, called models, which are ways of representing the world that you can use to examine real life. They’re not real life itself – making a model of real life that was accurate in every way would be like the perfect global map in a Lewis Carroll story that ended up being the size of the entire world! Instead, models are guides to help you when you need to know what’s going on in a particular situation.

Maybe you’re thinking about starting a business – microeconomics can help with everything from working out how much to pay staff to knowing which markets to avoid. Maybe you’re wondering whether a company is a good place to invest – microeconomics can help you figure out whether the market it’s in would let the firm make profits. Maybe you want to figure out how to get the best price for something you want to sell – microeconomics can help you work out how to auction it to get the highest price. In all these places in life, microeconomics can help you figure out an answer.

With all that, please come and join us as we tell you more of what this book is all about!

About This Book

This book takes you through the most common tools and models that microeconomists use to make sense of a complicated world. The aspects that we cover include the following:

What utility is and why microeconomists assume people maximise it.

What a firm is and what it does.

What happens when firms and consumers interact in a market.

Why competition is better than monopoly.

How to understand competition between firms, and how the results depend on what type of competition is going on.

What happens when some people in a marketplace know more than others.

How you can generalise – to some extent – the results from one market to all markets, and how that informs decisions you may make about distributing resources.

How you can figure out which options a firm will choose to take when it has competitors who also want to do the best for themselves.

How and why markets fail, and some of the things you can do about it.

Foolish Assumptions

Economists often make assumptions – they have to make models when they don’t know exactly how things work in a specific case. Sometimes those assumptions can be foolish – something we learnt from Samuel L. Jackson in The Long Kiss Goodnight and Eric Bogosian in Under Siege 2: Dark Territory! In writing this book, we make some foolish assumptions about you:

You’re interested in putting together a picture of why the world is as it is.

You’re smart and you don’t just accept a glib and easy answer – like us!

You’re interested in learning more about economics and are looking for a good place to start – maybe you’re considering studying more at school or university, or adding to your impressive portfolio of professional skills.

You’re a citizen bemused by discussion of business news, and want to know how anyone arrives at the opinions they do.

You’re not frightened about using the odd number or bit of simple maths – we try to do nearly everything in words, but economics deals with money and money comes in numbers and that’s not something we can do anything about!

You’re sure, from the book’s branding and its fun, accessible style and easy-to-read layout, that you’ll gain more utility from reading it than from other activities, such as archaeology or knitting!

Some of or all these assumptions may turn out to be true. Whichever are, we hope that this book chimes with your desire to understand the wild world of microeconomics!

Icons Used in This book

To help you get the most out of this book, we use a few icons to flag up particularly noteworthy items.

This icon highlights handy hints for smoothing out your microeconomics journey.

Some of the ideas in this book are so important for understanding microeconomics that they need special emphasis – often because they’re easy to get wrong! When you see this icon, you know that the associated text is something economists really want you to understand!

The world is full of pitfalls for the unwary. Here we stress areas for which you need to watch out.

Economists use technical terms to speak to each other – it’s just shorthand usually, so that no one needs to go through pages and pages of the same things. When you see this icon, you know that you’re being let into the clubhouse – economics is an inclusive science! – and picking up a piece of lingo that economists use to cut long stories short!

Theories are great, but ultimately economics is about the real world, and the best way to see what microeconomics can do is to see it in action. This icon tells you that you’re getting something from real-life practice to help you get the idea!

Beyond the Book

But wait! There’s more! We’ve not only put together a book that takes in a journey from simple microeconomics to complex models of competition, but also compiled some online bonus bits (at www.wiley.com/extras/microeconomics) to help you take things further:

An online Part of Tens with suggestions for places to take your understanding of microeconomics to the next level – from how to deal with government to how economists test their models.

Four online articles with further looks at the bits and pieces of microeconomics – from what ‘economically rational’ means to how you deal with the really long term.

A handy e-cheat sheet to keep with you – at least mentally! – at all times.

Where to Go from Here

The great thing about a factual book like this one is that you don’t have to worry about spoilers and can dive straight in anywhere you choose! If you’ve just seen the film Dr. Strangelove and you want to jump further into the wacky world of game theory in Part V, be our guest! If you want to think about why someone wants to break up a monopoly, move straight to Chapter 13 without passing Go! To see how economists think about pollution, check out Chapter 14!

Economists are fine with choice – trust us, we make a living because people are able to choose! However, if your choice is to start at the beginning, you also get to see how the whole subject unfolds, from simple ideas to more complex levels.

Of course the two approaches aren’t mutually exclusive, and no reason exists why you can’t do both – although obviously at different times!

With that, we wish you bon appétit  !

Part I

Getting Started with Microeconomics

For Dummies can help to get you started with lots of subjects. Visit www.dummies.com to discover more and do more with For Dummies books.

In this part …

See how microeconomics looks at firms and individuals.

Discover how microeconomics builds on people’s choices.

Understand how consumers choose.

Look at the ways firms make their decisions.

Chapter 1

Discovering Why Microeconomics Is a Big Deal

In This Chapter

Introducing the areas that interest microeconomists

Considering the central roles of decision-making, competition and co-operation