Microeconomics Explained

Utility and marginal utility · equal marginal utility per dollar · budget line · indifference curves · best bundle · individual demand curve

1. Utility and diminishing marginal utility
2. Spending a fixed budget with a utility table
3. Case: why the second coffee is worth less
4. The budget line — what you can afford
5. Indifference curves and the marginal rate of substitution
6. Finding the best bundle on a graph and in a spreadsheet
7. Income and substitution effects of a price change
8. Deriving an individual demand curve
9. Case: one commuter facing a higher bus fare

Price elasticity · midpoint method · total revenue · income and cross-price elasticity · tax burden · deadweight loss

1. Price elasticity of demand and the midpoint method
2. Supply elasticity and total revenue in a spreadsheet
3. Case: a shop deciding whether to cut its price
4. Income elasticity — normal and inferior goods
5. Cross-price elasticity — substitutes and complements
6. Case: classifying a store’s goods from sales data
7. Tax and subsidy burden — who really pays
8. Calculating each side’s share and the deadweight loss
9. Case: a sales tax on a common good

Total, average and marginal product · diminishing returns · fixed and variable costs · average and marginal cost · economies of scale · long-run average cost

1. Total, average and marginal product
2. The law of diminishing marginal returns
3. Case: adding staff to a small bakery with one oven
4. Fixed, variable and total cost
5. Building a cost table and graphing the cost curves
6. Case: where the cost curves meet in a small workshop
7. Returns to scale — increasing, constant and decreasing
8. The long-run average cost curve
9. Case: when a growing factory gets too big

Marginal revenue and marginal cost · profit peak · break-even · shutdown point · short-run and long-run equilibrium · zero economic profit

1. Marginal revenue and marginal cost, unit by unit
2. Why profit is highest where MR equals MC
3. Case: how many jobs should a small firm take?
4. Break-even — price against average total cost
5. The shutdown point — price against average variable cost
6. Case: a café in a slow season
7. Short-run equilibrium in perfect competition
8. Entry, exit and the long-run equilibrium
9. Case: a crowded market with easy entry

Monopoly pricing · deadweight loss · natural monopoly · regulated prices · price discrimination · monopolistic competition

1. Monopoly pricing, output and deadweight loss
2. Natural monopoly: average-cost and marginal-cost pricing
3. Case: regulating a water or electricity network
4. The three degrees of price discrimination
5. Student fares, volume discounts and tiered plans
6. Case: judging a tiered plan for profit and welfare
7. Product differentiation and short-run profit
8. Long-run zero profit and excess capacity
9. Case: a street of restaurants against a farm market

Payoff matrices · Nash equilibrium · prisoner’s dilemma · repeated games · cartels · comparing market structures

1. Games, payoffs and dominant strategies
2. Nash equilibrium in simultaneous-move games
3. Case: a pricing game and an advertising game
4. The prisoner’s dilemma among rival firms
5. Repeated games and why cartels form
6. Case: why cartels tend to break down
7. Perfect competition: setting MR = MC at the market price
8. Monopoly and oligopoly: setting MR = MC
9. Case: comparing price and profit across three structures

Marginal revenue product · wages and employment · adverse selection · moral hazard · framing and loss aversion · default effects

1. Labor demand and marginal revenue product
2. Labor supply and the competitive wage
3. Case: how many workers should a small firm hire?
4. Asymmetric information, adverse selection and moral hazard
5. Insurance, used goods and lending as examples
6. How markets respond: signals, screening and contract design
7. Why real choices depart from the rational consumer
8. Framing, loss aversion and default effects
9. Case: using a default and a frame in a sign-up form

Excludability and rivalry · private, public, club and common goods · externalities · taxes and subsidies · quotas · tradable permits

1. Excludability and rivalry
2. Classifying real goods: a street, a park, a gym, a fishery
3. Matching each market failure to a policy
4. Externalities and public goods: why markets fall short
5. Corrective tools: taxes, subsidies, quotas and permits
6. Worked example: comparing four policies
7. Choosing a real externality: congestion or pollution
8. Designing a corrective policy
9. Effects on price, output and welfare

Demand, cost and revenue model · profit-maximizing price · what-if tests · pricing and market-entry cases · limits of the model

1. Setting up a demand, cost and revenue model
2. Finding the profit-maximizing price and quantity
3. Testing what-if changes in the assumptions
4. Framing a pricing or market-entry decision
5. Applying elasticity, cost and market-structure tools
6. Where the model can mislead you