14.01 Principles of Microeconomics, Fall 2007
September 5, 2007
Overview: Themes, Types of Markets, Economic
Microeconomics is a branch of economics that studies how individuals and ﬁrms make decisions to allocate limited resources, typically in markets where goods or services are beingbought and sold.
1. Chap 1: Optimization and Allocation 2. Chap 1: Deﬁnition and Various Type of Markets 3. Chap 1: Economic Measurement 4. Chap 1: Economic Analysis
Consumer theory. Maximize preference (with limited income or time) Producer theory. Maximize proﬁt (with limited capital)
Deﬁnition and Various Type of Markets
Market. Aplace where buyers and sellers come together to exchange some product or good.
Product and Factor Markets
Market Product Market Factor Market Buyers individuals ﬁrms Sellers ﬁrms individuals
Table1: Product and Factor Markets.
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3 Economic Measurement
In a factor market, buyers are ﬁrms who need to hire workers and borrow money for capital expenditure, and sellers areindividuals who provide labor and save money in banks.
Types of Markets Based on Inﬂuence on Price
Monopsony Oligopsony Productshomogeneous heterogeneous Sellers many many a few one many many Buyers many many many many one
Table 2: Types of Markets Based on Inﬂuence on Price.
Table 2 shows diﬀerent markets based onproduct diﬀerentiation and inﬂu ence on price. Inﬂuence on price increases in moving from Competitive markets to Monopoly.
Flow and Stock Variables
Stock variables. Not...