Principles of Economics (Microeconomics)

Microeconomics and macroeconomics are closely related: because the change of the whole economy is decided by millions of individuals, it is impossible to understand the development of macroeconomics without considering the relevant microeconomics. However, they are really two different fields, and each field has its own unique analysis method and model.

Examples of explanation of comparative advantage:

Ross needs 20 minutes to produce 1 unit beef and 1 unit potato 10 minute.

Frank needs 60 minutes to produce 1 unit of beef and 15 minutes to produce 1 unit of potatoes.

Comparatively speaking, Rose has higher production efficiency and has absolute advantages in the production of various products.

However, the opportunity cost is different. Considering that roses 10 minutes can produce 1 2 units of beef in 10 minutes, the opportunity cost of 1 unit of potatoes is12 units of beef. Accordingly, in Frank's example, it takes 1 5 minutes to produce1unit of potatoes, which can be used to produce 1/4 units of beef.

Opportunity cost: what you give up in order to get something is the calculation method of comparative advantage. Frank's opportunity cost of producing 1 unit beef is 4 units of potatoes, and the corresponding rose is 2 units of potatoes, which means that the implied opportunity cost is smaller and more advantageous. In addition, the opportunity cost of potato production is inversely proportional to the opportunity cost of beef production.

Therefore, no matter a person has absolute advantages in all aspects, it is impossible to have comparative advantages in all aspects.

Frank traded potatoes for Ross's beef. If 1 unit of beef corresponds to 3 units of potatoes, everyone will get the product at a lower opportunity cost than himself.

Therefore, cooperation and interdependence, trade will promote their living conditions. More academic production methods. Of course, the implicit condition is that there can be a reasonable exchange cost. For example, the above 1/3 will be lower than the opportunity cost of the other party, thus promoting cooperation. But under what conditions will the exchange be carried out at the cost of 1/3?

Will the good news of agriculture be bad news for farmers?

Suppose there is research technology that can greatly increase the yield of crops. Think about whether it is good or bad for farmers.

Analysis: Because the new technology has increased the output, farmers can increase more grain output at the current price. The supply curve moves to the right and the price drops. Because the food is inelastic, the total income moves synchronously with the product price, so the total income drops. Farmers get less money. In this analysis, supply elasticity is basically ruled out, because supply is basically inelastic, and supply is elastic only in the long run.

Really, here's the thing:

The above analysis explains the great changes in the American economy in the past century. More than 200 years ago, most Americans lived in the countryside, and their understanding of agricultural production was quite primitive. So most of us have to engage in agriculture to produce enough food to feed the population of the whole country. However, with the passage of time, the technological progress of agriculture has increased the amount of food that each farmer can produce. Due to the inflexibility of the demand for food, this increase in food supply leads to a decrease in agricultural income, thus encouraging people to leave agriculture more. Promoted urbanization.

The price ceiling caused a shortage of goods. Resulting in inefficient distribution.

Rent control of housing has also caused a shortage. Caused the scarcity of supply and the increase of demand. However, we can protect the relevant rights and interests of housing users through relevant laws and give positive feedback to the suppliers.

About price control: In fact, decision makers control prices because they think the market is unfair. Price control is usually to help the poor. For example, the purpose of rent control law is to let everyone live in their own house, but price control often hurts those who want to help. The minimum wage law will increase the income of some workers, but it will also make other workers unemployed. Methods other than price control can be used to help people in need. For example, the government can improve the quality of life of poor users by subsidizing their housing funds, which does not reduce the supply of housing.