What Are These Major Questions In Microeconomics? Give Details And Include Examples With Your Answer.

1074 words - 4 pages

Microeconomics is the study of the choices that individuals and businesses make and the way these choices respond to incentives, interact, and are influenced by government. Microeconomics involves the analysis of how consumers make decisions about what to consume, how firms decide what and how much to produce, and how the interactions of consumers and firms determine how much of a good will be sold, and at what price. Many interesting questions can be approached by applying the methodology developed. For example, how will a cut in price of V3 Motorola hand - phone affect the quantities of these items that people buying?It is the standard approach of microeconomics, although not without controversy, to assume that consumers seek to maximize satisfaction and firms seek to maximize profits. The mechanism through which consumers and firms interact with each other is the market. Microeconomics analyzes the determination of market demand and supply, various forms of market structures, and how they affect economic efficiency.As what you've read above, the economic choices that individuals, businesses, and the governments make and the interactions of those choices answer the three major questions that microeconomics focus.To give an idea the type of questions that microeconomics deals with; let's start with a simple example. Consider some of the important decisions a firm, says Dell Computer, needs to make.First, Dell needs to decide what kind of computers to produce: the processor, hard disk capacity, RAM, modem, CD-ROM, installed software, monitor, etc.Second, Dell needs to decide how to produce the computers: in one location or in different locations; equipment and technologies to use; make or purchase choices, etc.What may determine Dell's production decision: consumer demand; technological feasibility; costs of production; products of other computer producers? and so onThird, Dell needs to decide how to price its computers. This again will depend on things such as consumer demand and production costs, as well as on the prices of competitors.Now, these decisions are not unique to Dell. Other computer producers will face the similar types of decision problems. In fact, almost all business firms need to make decisions regarding what to produce, how to produce and for whom they'll produce.What?What goods and services get produced and in what quantities?Goods and services are the objects that people value and produce to satisfy human wants. The nation's farms, factories, construction sites, shops, and offices produce array of goods and services that range from necessities such as food, house, and apartment to leisure items such as ocean cruise, SUVs, and DVD players. The vast array of goods and services produced into four lager groups:* Consumption goods and services: are goods and services that are bought by individuals and used to provide personal enjoyment and contribute to a person's standard of living. Example: housing, SUVs, movies, chocolate...

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