Key Microeconomic Concepts and Market Principles

Determinants of Demand

• Income of the consumer
• Price of the commodity
• Changes in the prices of related goods
• Tastes and preferences of the consumers
• Change in the distribution of income
• Price expectations
• State of economic activity

Production and Cost Analysis

The long-run total cost curve shows the total cost of a firm’s optimal choice combinations for labor and capital as the firm’s total output increases.

In microeconomics, economies of scale are the cost advantages that enterprises obtain due to size, throughput, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Market Structures

• Monopolistic competition
• Oligopoly
• Monopsony
• Oligopsony
• Monopoly
• Perfect competition

Wealth Distribution Metrics

Lorenz Curve

In economics, the Lorenz curve is a graphical representation of the cumulative distribution function of the empirical probability distribution of wealth, developed by Max O. Lorenz in 1905 to represent inequality in wealth distribution.

Gini Coefficient

The Gini coefficient measures the inequality among values of a frequency distribution (e.g., levels of income). A coefficient of zero expresses perfect equality, while a coefficient of one expresses maximal inequality.

Marginal Analysis

In economics, the marginal utility of a good or service is the gain from an increase or loss from a decrease in the consumption of that good or service. The law of diminishing marginal utility states that the first unit of consumption yields more utility than subsequent units. The marginal decision rule states that a good should be consumed at a quantity where marginal utility equals marginal cost.

Marginal cost is the change in total cost that arises when the quantity produced increases by one unit. Marginal revenue (R') is the additional revenue generated by increasing product sales by one unit.

Individual Demand

The term individual demand refers to the entire price-quantity relationship depicted by the demand curve. The individual demand function outputs the quantity demanded at any given price.