Economics 101: Intro to Micro
Hi STEMinists! Per the request of tutees, we have decided to start a summary series on economics for students to review. Here there will be links to more resources and summaries of each tutoring lesson or general economic concepts that we go over in tutoring. See below!
Scarcity refers to the fundamental economic problem of having unlimited wants and needs, but limited resources to fulfill them. It is the basis for the study of economics, as it forces individuals and societies to make choices about how to allocate their limited resources.
Microeconomics is the branch of economics that studies the behavior of individual economic units, such as households and firms, and how they make decisions in the face of scarcity. It is concerned with the allocation of limited resources among competing uses and the determination of prices of goods and services.
One of the fundamental concepts in microeconomics is the law of supply and demand, which states that the price of a good or service is determined by the balance between the quantity of it that is available (supply) and the quantity of it that is desired by buyers (demand). The relationship between supply and demand is illustrated in a supply and demand graph, which plots the quantity of a good or service on the horizontal axis and the price on the vertical axis.
The supply curve shows the quantity of a good or service that is available at different prices. It is typically upward-sloping, meaning that as the price of a good or service increases, the quantity of it that is available for sale also increases. This is because higher prices provide an incentive for producers to increase their output in order to earn more profit.
The demand curve shows the quantity of a good or service that is desired at different prices. It is typically downward-sloping, meaning that as the price of a good or service increases, the quantity of it that is desired decreases. This is because higher prices reduce the purchasing power of consumers, making it more difficult for them to afford the good or service.
The intersection of the supply and demand curves is known as the equilibrium price, which is the price at which the quantity of a good or service that is available is exactly equal to the quantity that is desired. At this price, there is no tendency for the price to change, as the market is in balance.
Changes in supply and demand can lead to changes in the equilibrium price and quantity of a good or service. For example, if the demand for a good or service increases, the demand curve will shift to the right, resulting in a higher equilibrium price and a higher equilibrium quantity. On the other hand, if the supply of a good or service increases, the supply curve will shift to the right, resulting in a lower equilibrium price and a higher equilibrium quantity.
The law of supply and demand is a fundamental principle of microeconomics that helps to explain how prices are determined in a market economy. By understanding this concept, we can gain insights into how individual households and businesses make decisions and how markets function. It is an important tool for understanding the forces that shape economic outcomes and can be used to inform policy decisions.
For more information on the principle of scarcity and its role in economics, you may want to refer to the following resources:
The Concise Encyclopedia of Economics: https://www.econlib.org/library/Enc/Scarcity.html
BY: Project STEMinist Economics Tutoring Team