Microeconomics

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Microeconomics by Mind Map: Microeconomics

1. Supply

1.1. Willing & able to sell at certain P and time

1.2. LAW OF SUPPLY→ P goes up, Qs goes up

2. Opportunity cost

2.1. Someone’s next best alternative.

3. PPF

3.1. Growth

3.1.1. Project specifications

3.1.2. End User requirements

3.1.3. Action points sign-off

3.2. Increases output

3.3. More choices

4. Efficiency

4.1. Allocative: correct location of resources

4.2. Productive: + production using - resources as possible

4.3. Economic: mix of both

5. Demand

5.1. LAW OF DEMAND→ If P goes up, Qd goes down

5.1.1. Materials

5.1.2. Personel

5.1.3. Services

5.1.4. Duration

5.2. Willing & able to pay

5.3. Always negative

6. Factors of production

6.1. Land & resources (physical)

6.2. Labour (human)

6.3. Capital (financial)

6.3.1. KPI's

6.4. Enterprise (management)

7. Government Intervention

7.1. Taxes

7.2. Subsidies

8. Types of goods

8.1. Normal: higher response to consumer income

8.2. Substitute: changes respect other products

8.3. Inferior: consumer income increases, demand decreases

8.4. Superior: consumer income increases, demand increases

8.5. Complement: goods used together

9. Values

9.1. Price elasticity of demand (PED):

9.2. Price elasticity of supply (PES)-

9.3. Income Elasticity of demand (YED)-

9.4. Cross elasticity of demand (XED)-

10. Price Control

10.1. Price ceiling The government chooses to set a maximum price in a certain good, below the equilibrium price.

10.2. Price floor The government sets a minimum price for a certain good, above the market equilibrium price.

11. Surplus

11.1. Consumer surplus: spend less than you were willing and able

11.2. Producer surplus: receive more than expected

11.3. Social surplus: the sum of both

12. Theory of Firm

12.1. Cost theory

12.1.1. Short run → One factor of production is fixed. Length = time it takes to increase Q of fixed factor. Production is part of the short run.

12.1.2. Long run→ all factors of production variable. When fixed factors are changed short run starts again. Planning is part of it.

13. Marginal benefit

13.1. The benefit you get from the last increase in an unit of a certain product.

14. Costs

14.1. Explicit costs: directly related to production, direct payments for factors of production

14.2. Opportunity cost or Implicit cost: entrepreneur takes a risk to start the business

14.3. Economic cost: both together

14.4. Total cost: cost to produce all of a specified level of output

14.5. Average cost: cost per worker

14.6. Marginal cost: additional cost per additional unit of output

15. Marginal Cost

15.1. The change of the total cost for producing one more unit of certain product

16. Economies of scales: Falls in LRAC that come when firm alters all of its factors of production, in order to increase output.

17. Diseconomies of scale: Increases in LRAC that come when firm alters all of its factors of production, in order to increase output.

18. Monopoly: When only one firm has total control over the market.

19. Oligopoly: Has two or more firms dominating the market.

20. Externalities

20.1. Consumption Externalities→ (consuming causing positive/negative externality to a 3rd one)

20.1.1. Positive: If you consume you create welfare for others, for example hybrid cars, you help reduce contamination if you buy one. F.E.: free riding

20.1.2. Negative: Firms→ profiting maximizing→ government rectifies situation w/taxes→ MPC curve moves up

20.2. Production Externalities → (Costs of production must be paid by someone ≠producer of a good)

20.2.1. Positive: As a firm you benefit someone else while producing your product. Creating welfare

20.2.2. Negative: You damage someone else as a result of your production process. Is an implicit cost not taken into account. Having welfare loss.

21. Monopolistic Competition

21.1. Products are differentiated

21.2. Assumptions

21.2.1. many producers and consumers

21.2.2. no perfect substitutes

21.3. Productive efficiency

21.3.1. min. average cost unachieved

21.4. Allocative efficiency

21.4.1. Price> marginal cost

21.4.2. Price < monopoly’s