Characteristics

of Microeconomics

Characteristics of Microeconomics
1. Microeconomics looks at the decision of

individual units.
2. Microeconomics involves product pricing in
various types of market structures such as
pure competition, monopoly, monopolistic
competition and oligopoly.
3. Microeconomics is concerned with social
welfare.
4. Microeconomics has a limited focus. It is just
a part of the economic discipline.

Characteristics of Microeconomics
5. Microeconomics helps develop a set of useful

and marketable skills as follows:

Microeconomics helps develop logical reasoning
b. Microeconomics helps develop skill in the
construction and se of models.
c. Microeconomics employs optimizing techniques
that are useful for making decisions in a variety
of situations
d. The concepts studied in microeconomics are
applicable to personal resource allocation
decisions
a.

Economic Models
Best known economic model is the
Supply and Demand as expressed in
three different forms: Verbal/ logical,
Mathematical and Graphical

Verbal
Supply is a schedule of prices and quantities

that a supplier or suppliers are willing to offer

for sale at each price per period.
These suppliers would be encourage to sell
more at higher prices and would sell less at
lower prices.
Thus , prices and quantity offered for sale are
directly related, that is, the higher the price the
more supply; the lower the price, the less
supply.

Mathematical notations
The Law of Supply can be expressed

succinctly in an equation:
Qs = 500P
The equation Qs = 500P means that if the
Price is 1
Quantity supplied would be 500
(500 x 1 = 500)

Mathematical notations
Qs = 500P
The equation Qs = 500P means that if the
Price is 3
Quantity supplied would be 1,500
(500 x 3 = 1,500)
Thus, we can see that there is a direct
relationship between the price and the quantity
supplied as explained earlier.

Table 1
Supply Schedule
Price

Quantity Supplied

500

1,000

1,500

2,000

2,500

3,000

3000

Quantity

2500
2000
1500
1000
500
0

Price (in peso)

Figure 1: Supply Schedule in Graph Form

Models are Abstractions

1. Models to explain the resource allocation or

choice decisions of individual household.

Producers, and firms.
2. Models to explain how prices and quantities
exchanged are determined in various types of
market structures.
3. Models to examine the market economy as an
interrelated system