The study of economic activities of persons and the small groups of persons is called Microeconomics. According to Prof. Boulding, “This includes the study of particular firms, families, individual prices, labor, income, individual industries and particular things.” This makes important relation in distributing the resources in using particular experiments and analyzing the prices. The main sectors among the Microeconomics are: The decision about production balancing of firms and industries, the wages of particular labor work, rice, tea or car etc. According to Ackley, “Microeconomics makes relations with the distribution of resources among competitive groups and distribution of total production of firms and industries. It deals with the prices of particular objects and services.” In fact, as Maurice Dobb said—Microeconomics is a microscopic study of an economy. This is a source of seeing an economy through microscope so that one can know about the movements of producers and individual consumers and the markets of individual objects. In other words, we study corelations of an individual family, firms and individual industries in Microeconomics. Thus, economics is the study of aggregates. Microeconomics: Theory and Application examines how individual consumers, firms, and industries make decisions, using core principles like supply and demand, cost analysis, and market structure to explain real-world economic behaviour. It bridges theoretical models (e.g., utility maximization, profit maximization) with practical applications, including pricing strategies, policy evaluation, and market competition analysis. Microeconomics: Theory & Application, teaches students how fundamental tools of analysis are used explain and predict market phenomena. Designed for both economics and business students, this thorough yet accessible textbook describes basic microeconomic principles using various applications to clarify complicated economic concepts and provides an essential foundation of microeconomics knowledge. Clear and engaging chapters discuss cutting-edge models and explore numerous real-world examples of microeconomic theory in action.
Eric French is an Assistant Professor (promotion-track to Associate Professor) at the Faculty of Economics at the University of Cambridge. Previously, he was a postdoctoral researcher at the Centre for Law & Economics, ETH Zurich, and earned his Ph.D. in Economics from LMU Munich. He has also held visiting positions at Harvard University and Princeton University and was awarded the Prize for Best Dissertation in 2021/2022 by the German Economic Association's Section on Economics of Education, as well as the Further Ludwig Erhard Prize in 2023. His research focuses on inequality, macroeconomics, and international economics. He is also an Assistant Professor as well as a Research Affiliate at the Centre for Economic Policy Research, a Faculty Fellow for Economic Policy Research and a Faculty Research Fellow at the National Bureau of Economic Research.
Preface 1. EXPLORING MICROECONOMICS...........................................................1 1.1 Introduction 1.2 Defining Economics 1.3 Nature and Scope of Economics 1.4 Opportunity Cost 1.5 Scarcity 1.6 The Production Possibilities Frontier or Curve (PPF/ PPC) 1.7 Market System As a Way To Organise Economic Activities 1.8 The Basic Concept Of Microeconomics 2. CONSUMER CHOICE ..............................................................................23 2.1 The Budget Constraint 2.2 Optimal Choice 2.3 Using the Tangency Condition To Understand When A Basket Is Not Optimal 2.4 Consumer Choice With Composite Goods 2.5 Application: Quantity Discounts 2.6 Revealed Preference 3. SUPPLY AND DEMAND............................................................................50 3.1 Determinants of Demand and Supply 3.2 Demand and Supply Schedules 3.3 Individual and Market Demand and Supply 3.4 Shifts In the Demand and Supply Curves 3.5 Interaction of Demand and Supply 4. THE HOUSEHOLDS..................................................................................71 4.1 Diminishing Marginal Utility 4.2 Indifference Curves–Meaning and Properties, and Budget Constraint 4.3 Budget Constraint 4.4 Choice Between Leisure and Consumption 5. THE FIRMS..................................................................................................95 5.1 Concept of Firm and Industry 5.2 Production Function 5.3 The Law of Variable Proportions 5.4 Isoquant and Isocost Lines 5.5 Cost Minimizing Equilibrium Condition 5.6 Cobb Douglas Production Function 6. COST OF PRODUCTION.......................................................................135 6.1 The Concept 6.2 Cost Functions: Short-Run and Long-Run 6.3 Returns To Scale 7. THEORY OF COSTS................................................................................161 7.I. General Notes 7.2 The Traditional Theory of Cost 7.3 Long-Run Costs of the Traditional Theory: the ‘Envelope’ Curve 7.4 Modern Theory of Costs 7.5 Engineering Cost Curves 7.6 The Analysis of Economies of Scale 7.7 Empirical Evidence On the Shape of Costs 7.8 The Relevance of the Shape of Costs In Decision-Making 8. PERFECT COMPETITION .....................................................................222 8.1 Assumptions 8.2 Short-Run Equilibrium 8.3 Long-Run Equilibrium 8.4 Dynamic Changes and Industry Equilibrium 9. MONOPOLISTIC......................................................................................248 9.1 Assumptions 9.2 Costs 9.3 Product Differentiation and the Demand Curve 9.4 The Concept of the ‘Industry’ and ‘Product Group’ 9.5 Equilibrium of the Firm 9.6 Critique of Chamberlin’s Model 9.7 Comparison With Pure Competition Glossary......................................................................................................265 Bibliography...............................................................................................284 Index.................................................................
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