Microeconomics For Dummies

Introduction

Economics is about many things. On one level, it’s concerned with humanity’s struggle to cope with scarcity and how this leads individuals to make choices about the things that should have priority. On another level, it’s about the human quest for happiness in an uncertain world, and the ways people have found to achieve it. On yet another level, economics is about how societies organize themselves from the bottom up, using markets as a way of trading with each other. However you look at it, economics is a huge subject.

Microeconomics looks at economics on the smallest scales — at the level of individual consumers and firms — and builds up to an understanding of how markets and industries work. Microeconomics has become a very big subject too, taking in everything from what kinds of decisions people make to the right way to measure and analyze those decisions. It’s the part of economics that’s like looking through a microscope as small creatures go about their business.

So that’s what microeconomists do. The microscope, though, is a bit unusual. It’s not made of glass, but of tools, called models, which are ways of representing the world that you can use to examine real life. They’re not real life itself. Making a model of real life that was accurate in every way would be akin to the perfect global map in a Lewis Carroll story that ended up being the size of the entire world. Instead, models are guides to help you when you need to know what’s going on in a particular ...