Principals Of Microeconomics Essay

1539 words - 6 pages

In the modern economic system presented in the world today, microeconomics, and the study of such, is a vital part of the budding economic scholar. In most circumstances, microeconomics is based on the cumulative study of how individuals and firms, or a combination of the two, make decisions regarding the allocation of resources, typically in markets where goods and services are bought and sold. This allocation, or optimization of limited funds through distribution, usually follows 2 standardized theories: the Consumer and Producer. Consumers usually choose to maximize their available preference in the market, with a limited income value or time aspect. This is evident in the world economy, with consumers always being fiscally motivated and generally basing decisions off of price and how long it may take to fulfill this decision. Producers follow a different spectrum. Generally, producers base their actions and decisions off of maximizing profit, with little capital usage or loss. These two relationships bud off of each other, as producers’ profit is generated by the consumer’s interest in certain goods created by the producer.
With both aspects in hand, the consumer and producer fall into many forms of markets. There are two main categories of markets: Product Markets, and Factor Markets. Product Markets are the more commonly seen markets, in which individuals purchase products from firms or businesses. This is where the Consumer and Producer theory comes into play. Factor Markets are generally the opposite, having firms buy services from individuals. These services may not follow the definition of “buy,” but rather guide along the relationship between employer and employee. A Factor Market is where firms or businesses seek out workers and borrow money for capital expenditures, and the sellers are individuals who provide labor to the firms, and usually save their money in banks.
Within these categories, many sub-markets branch out. Competitive Markers are the most common, having many sellers providing similar products to many buyers. Competitive businesses make profit based off of the relationship between net and gross income, and depend on providing a more reasonable price than its competitor. This type of market is seen mainly with a capitalist economy. Monopolistic Markets are similar to Competitive, but they differ in the type of product. Monopolistic businesses provide differing items that all provide a common service. A Monopolistic business gains profit by providing a product that the same basic service as another business, but differs in small details that contour to different types of buyers. The auto industry, proving scooters, motorcycles, automobiles, and other forms of differing transportation is an example.
Oligopolistic Markets are less common, but still prevail in the modern economy. An Oligopolistic business is one with few competitors, basing its revenue off of “outsmarting” its opponents by analyzing their decisions and...

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