Essential Graphs for Microeconomics
Essential Graphs for Microeconomics
Basic Economic Concepts
( Production Possibilities Curve
Nature & Functions of Product Markets
( Demand and Supply: Market clearing equilibrium
(Floors and Ceilings
(Consumer and Producer Surplus
(Effect of Taxes
Theory of the Firm
(Short Run Cost
(Long Run Cost
(Perfectly Competitive Product Market Structure
• Long run equilibrium for the market and firm-price takers • Allocative and productive efficiency at P=MR=MC=min ATC
(Imperfectly Competitive Product Market Structure: Pure Monopoly
(Imperfectly Competitive Product Market Structure: Monopolistically Competitive
Long run equilibrium where P=AC at MR=MC output
Factor Market
(Perfectly Competitive Resource Market Structure
Perfectly Competitive Labor Market – Wage takers Firm wage comes from market so changes in labor demand do not raise wages.
(Imperfectly Competitive Resource Market Structure
Imperfectly Competitive Labor Market – Wage makers Quantity derived from MRC=MRP (Qm) Wage (Wm) comes from that point downward to Supply curve.
(Market Failures - Externalities
Thinking on the Margin…
Allocative Efficiency: Marginal Cost (MC) = Marginal Benefit (MB) Definition: Allocative efficiency means that a good’s output is expanded until its marginal benefit and marginal cost are equal. No resources beyond that point should be allocated to production.
Theory: Resources are efficiently allocated to any product when the MB and MC are equal.
Essential Graph:
Basic Economic Concepts
( Production Possibilities Curve
Nature & Functions of Product Markets
( Demand and Supply: Market clearing equilibrium
(Floors and Ceilings
(Consumer and Producer Surplus
(Effect of Taxes
Theory of the Firm
(Short Run Cost
(Long Run Cost
(Perfectly Competitive Product Market Structure
• Long run equilibrium for the market and firm-price takers • Allocative and productive efficiency at P=MR=MC=min ATC
(Imperfectly Competitive Product Market Structure: Pure Monopoly
(Imperfectly Competitive Product Market Structure: Monopolistically Competitive
Long run equilibrium where P=AC at MR=MC output
Factor Market
(Perfectly Competitive Resource Market Structure
Perfectly Competitive Labor Market – Wage takers Firm wage comes from market so changes in labor demand do not raise wages.
(Imperfectly Competitive Resource Market Structure
Imperfectly Competitive Labor Market – Wage makers Quantity derived from MRC=MRP (Qm) Wage (Wm) comes from that point downward to Supply curve.
(Market Failures - Externalities
Thinking on the Margin…
Allocative Efficiency: Marginal Cost (MC) = Marginal Benefit (MB) Definition: Allocative efficiency means that a good’s output is expanded until its marginal benefit and marginal cost are equal. No resources beyond that point should be allocated to production.
Theory: Resources are efficiently allocated to any product when the MB and MC are equal.
Essential Graph: