Supply and Demand and Study Guide

20292 Words Feb 3rd, 2012 82 Pages
ECO11 (ver8)

MICROECONOMICS 1

STUDY GUIDE

ECO11

MICROECONOMICS 1

STUDY GUIDE

© University of South Australia 2009
This work was printed from camera-ready copy submitted by the Unit Coordinator. The Flexible Learning Centre of the University of South Australia was not involved in its production.

CONTENTS

Contents 3
Introduction 5
An introduction to the economic perspective 13
Demand and supply 17
Elasticity 21
Market applications 25
The behaviour of firms and costs 31
Perfect competition 37
Monopoly 43
Monopolistic competition 47
Oligopoly 51
Economic performance, market failure and government intervention 55
Appendix: Guide to working
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Economic ideas provide a conceptual framework for understanding the forces that shape our personal and public lives.
Economies (people!), faced with scarcities, have to make decisions about the way resources are allocated. First, they have to decide what goods and services have to be made and how they are to be made. Then they have to decide how much of each good and service to produce as well as who receives the proceeds of production in what proportions.
These inter-connected allocation and distribution decisions must be resolved so that production and satisfaction can simultaneously occur.
The complex system of human values, shared beliefs and accepted behaviour associated with the resolution of allocation and distribution decisions is known as an economic system. Economic systems have varied from the traditional systems based on beliefs and social hierarchies, to planned or command economics through to a mixture of market and planned systems of production and exchange.
Economic systems are judged in terms of their efficiency and equity. Criticisms of planned systems invariably focus on aspects of inefficiency. Criticisms of market behaviour are invariably driven by equity considerations.
This unit does not examine economic systems on the large scale (this is the area called macroeconomics) but rather,

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