Lecture Notes: Advanced Microeconomics

Key Topics

• Microeconomic Principles

  • Understanding supply and demand
  • Market equilibrium
  • Elasticity and its implications

• Consumer Behavior

  • Utility maximization
  • Budget constraints
  • Indifference curves

• Production and Costs

  • Short-run vs long-run costs
  • Economies of scale
  • Production functions

• Market Structures

  • Perfect competition
  • Monopoly and oligopoly dynamics
  • Game theory and strategic behavior

Important Details

Supply and Demand

• Law of Demand: As price decreases, quantity demanded increases.
• Law of Supply: As price increases, quantity supplied increases.
• Equilibrium: The market state where supply equals demand.

Elasticity

• Price Elasticity of Demand: Measures responsiveness of quantity demanded to a price change.
• Implications: Affects total revenue and pricing strategies.

Consumer Behavior

• Utility: Satisfaction received from consuming goods/services.
• Budget Constraint: Limit on the consumption bundles a consumer can afford.

Market Structures

• Perfect Competition: Many firms, identical products, free entry and exit.
• Monopoly: Single firm, unique product, high barriers to entry.
• Oligopoly: Few firms, interdependent decision-making, potential for collusion.

Cost and Production

• Fixed vs Variable Costs: Fixed do not change with output, variable do.
• Economies of Scale: Cost per unit decreases as production increases.

Strategic Behavior

• Game Theory: Analyzing competitive strategies where the outcome depends on actions of others.

Conclusion

This lecture covers the foundational aspects of microeconomics, focusing on how individuals and firms make decisions based on relative scarcity and market interactions. Understanding these principles is crucial for analyzing economic policies and business strategies.