Microeconomics: Production and Consumption will examine the ways in which markets increase overall welfare through the concepts of consumer and producer surplus. We will discuss the concepts of marginal costs and benefits and take a look at how they affect a firm’s decision on whether or not to make one more or one less product – why firms produce certain levels of output, taking into consideration opportunity cost and sunk (fixed) cost.
We will then look at the causes and ramifications of income inequality. Protracted poverty and inequality can cause long term harm to an economy’s development.
We then turn our attention to the individual consumer and the characteristics that compel a consumer (to choose) to spend income on goods and services. The consumer experiences utility – a measure of satisfaction – with every purchase that he or she makes, and economists measure that utility in order to find a consumer’s optimal rate of consumption.
Finally, you will learn about one of the most important economic agents: the producer. The producer (firm) is responsible for creating the production function (output) and is subject to various cost measures as well as the results of diminishing returns. You will explore these ideas more fully as you delve into the relationship between quantity of input and quantity of output.