Features of the subject of microeconomics

The subject of the study of microeconomics is the patterns of behavior and decision-making of primary economic units - households and firms, as well as the peculiarities of the formation, as a result of their interaction, of higher-order structures - markets for individual goods and industries. In other words, microeconomics studies the economic behavior of producers, consumers, owners of production and financial resources, as well as the functioning of various types of market structures and individual industries.

Microeconomics studies individual economic units and views the entire economy from the perspective of those units.

Microeconomics is the science of decision making that studies the behavior of individual economic entities. Its main problems:

1) prices and volumes of production and consumption of specific goods;

2) the state of individual markets;

3) distribution of resources between alternative goals.

Microeconomics studies relative prices, that is, the relationship between the prices of individual goods, while macroeconomics studies the absolute price level.

The direct subject of microeconomics is economic relations associated with the effective use of limited resources, decision-making by individual economic entities in conditions of economic choice.

Let us clarify the given definitions of the subject of microeconomics.

First. Under the conditions of the law of scarcity of resources, microeconomics formulates the basic principles of rational behavior of all types of economic entities, including enterprises, firms, households, etc., and studies the mechanism for making optimal management decisions.

Second. Microeconomics reveals the content of economic and social efficiency, develops criteria and corresponding indicators that are used in assessing the final results of management.

Third. Modern microeconomics can be presented as a set of theories, including production theories, theories of the firm, pricing theories, theories of the development of market relations and antitrust regulation, and finally, theories of production costs, income and profit.

These theories and other concepts, brought into a rigorous system, act as the most important components of modern microeconomic analysis.

Fourth. Microeconomics studies economic relations that arise in the process of production, exchange, distribution and consumption of material goods at the level of economic entities. Revealing the content of these relations, modern microeconomics explores the relations of appropriation and ownership, the formation and development of the economic interests of economic entities.

microeconomics science analysis

Object of microeconomics. The problem of choice as the main object of microeconomic analysis

The object of microeconomics is the economic activity of people and the general economic problems that arise during this, solved in accordance with existing institutions and their systems.

In microeconomics, the study of the following issues is of particular importance:

1) economic behavior of people, fixed in adequate institutions and social structures. The key institutions are the market, property and the state;

2) decision-making by economic entities and their implementation of relevant economic actions;

3) the problem of choosing one of the alternative options for using resources;

4) it touches on the issue of the rarity of goods and their limitations.

The main task of economic subjects of microeconomics is to make economic choices determined by limited resources. In any society, limited resources force choices to be made to address the following issues:

1. What to produce and in what volume.

The manufacturer always has the option of alternative production. To select an acceptable production option, it is necessary to study the needs of the consumer, the satisfaction of which is the ultimate goal of any production.

2. How to produce the selected types of goods.

The manufacturer must decide what resources and in what quantities to involve in the production process. By studying the theory of production, microeconomics helps to clarify the mechanism of resource distribution between enterprises and industries.

3. For whom to produce, who will receive the products produced.

4. What volume of resources to use for current consumption and what for the future.

The last two questions are related to the study of income and its distribution into current and future consumption. Resources can be used for immediate consumption or part of the resources can be used to ensure future consumption. A decision must be made how much of the income to save to finance investment in the economy, to increase production capacity, to accumulate savings in the family.

Thus, the main problem that microeconomics deals with is the problem of choice in a market economy. All economic entities face it. It is known that in economics the problem of choice arises primarily due to limited resources and limitless needs. In a market economy, it becomes very complex and capacious in its content due to the existence of economic freedom among economic entities.

First of all, the problem arises of choosing the goals of economic activity, which may be different for different economic entities. But if we talk about the goals of commodity producers, then microeconomics reduces them to profit maximization. When a commodity producer becomes a seller, his goal is to maximize the income received from the sale of goods. The goal of the buyer is to maximize the utility acquired, and the goal of the consumer is to maximize the satisfaction of needs at given costs for the acquisition of commodity goods.

The stated goals of various subjects of microeconomics can be achieved in different ways. Thus, making a profit is possible as a result of the production and sale of a wide variety of goods. This means that the manufacturer faces the problem of choosing a profitable product. How such a choice is made, what rules should be followed - all this is explained by microeconomics. This science also explains the behavior of consumers when choosing goods in order to maximize the degree of satisfaction of their needs.

Defining a goal also involves choosing the means to achieve it. In any economy, this means the choice of resources and the choice of ways and methods of using them. In a market economy, for enterprises as commodity producers, along with labor, capital, material and natural resources, monetary resources, which can be converted into any resources for both production and non-production purposes, become important.

Microeconomics explains how the problem of alternative use of limited or rare resources is solved by both producers and consumers.

It is well known that a person’s desire to maximize consumption and minimize his participation in production characterizes him as a rational person. It is the rational person who is the object of attention of microeconomics. That is why microeconomics is also called the science of rational behavior of subjects of a market economy.

Microeconomics believes that it is the market that helps make effective economic decisions, sending appropriate impulses and signals to rational subjects. Competition and prices play a decisive role in this. Competition forces effective decisions and actions, and prices provide the information necessary for this. Thanks to them, producers know what, how much, how and for whom to produce, and consumers know what and how many goods to purchase at minimal cost and how to consume them (in what combination) to maximally satisfy their needs.

That is why microeconomics pays considerable attention to the functioning of the market mechanism, the laws to which it is subject, and how it determines the behavior of economic entities.

We examined in detail two parts of the system of economic relations:
a) socio-economic relations based on property and
b) organizational and economic relations.

Now, in the future, the main forms of economic activity will be analyzed (disassembled):
microeconomics,
macroeconomics and world economy.

All these forms of management have their own characteristics of the types of economic relations we have considered: a) property, b) cooperation and division of labor, c) forms of economic organization and d) economic management. In this regard, it is important to understand the distinctive features of microeconomics, macroeconomics and the world economy, as well as the characteristics of economic relations characteristic of them. These forms of economic activity differ primarily in their scale. Microeconomics– this is management in small forms (within households and small enterprises), macroeconomics- creative activity within the borders of the country, and the world economy embraces economic relationships on a global scale.

Microeconomics includes two forms of activity - households and comparatively small businesses.

What is considered a household World statistics (a science that studies quantitative indicators of the development of society) believes that a household is a collection of persons who live in one residential building or part of it. They may or may not be related, and they jointly provide themselves with food and everything necessary for life. That is, household members fully or partially pool and spend their funds. A household can also consist of one person living independently. Household is a common household run by a group of people living together.
Rice. 4.1. Structure of actual final consumption of households in Russia in 2003

As can be seen from the diagram shown in Fig. 4.1, the actual consumption of Russian households ultimately consisted of the following parts:
purchases of goods and payment for services (77.6%),
social payments from state and municipal budgets and charitable funds (15.8%),
receipts of goods and services in kind (6.6%).

A household is not just a consumer association of people. It also engages in economic activities that generate varied income.

These activities include:
1) receiving income from the sale of factors of production (for example, labor) and from property (rent for housing and land, interest on money deposited in a bank, income from shares, etc.);
2) housekeeping (work in subsidiary agriculture, purchasing consumer goods and services, home cooking and other products, consumption of material and spiritual goods);
3) education of the younger generation;
4) “external” economic relations (paying taxes to the state, receiving social benefits from the state, economic relations with foreign countries, including receiving money transfers, parcels, etc.).

What are the features of small enterprises (modern)

In the XIX–XX centuries. The number of relatively small enterprises that were in common shared ownership (partnerships, cooperatives, joint-stock companies) increased significantly. This strengthened the economic position of small entrepreneurs.

The most important reasons for the sustainability of microeconomic farms are:
their flexibility – quick adaptation to changes in consumer demands;
the need to service small volumes of market transactions. Examples include the sale of clothing and shoes, taking into account the non-standard needs of customers; repair work (carried out by watch, shoe, and car repair companies); provision of personal services (family doctor, lawyer, hairdresser); stores of extremely expensive goods for people with very high incomes (luxury yachts, high-quality sports cars, etc.);
highly specialized production of components for large assembly plants; sales of products of large companies (TVs, refrigerators, washing machines);
the use of modern microprocessor technology, which provides a great economic effect in small enterprises.

In highly developed countries, small businesses play a very important role in the economy: they create approximately 1/2 of the country's total national product. The state provides financial assistance to small businesses and reduces taxes.

Subject of study of microeconomic theory and its role in the national economy

Definition 1

Microeconomics is a science that studies the functioning of economic entities in the course of their activities of production, distribution, consumption and exchange.

Microeconomic science allows us to explain how and for what reason certain economic decisions of the lower level are made; how consumers make decisions about purchasing a product or service; what impact does a change in prices and income have on their choice? how enterprises plan their workforce; how workers make decisions about where and how long they work.

The subject of microeconomics is economic relations that are associated with the efficient use of resources in conditions of their limitation, the implementation of decision-making by economic agents subject to economic choice. For any society, with limited resources, choice and its rational use for the processes of production and consumption are assumed.

Microeconomics studies the following main areas:

• Consumer problems - why agents choose precisely such sets of goods;
• Problems of producers - how and why agents of production choose certain sets of production factors and the structure of the range of products;
• Market equilibrium and market structure;
• General equilibrium state - how and why prices for certain goods or services are formed, how exchange is carried out under different offers, under what conditions the market environment is economically efficient;
• Information asymmetry - how and why divergent information sets of economic agents can lead to ineffective economic actions;
• External effects - how and why there is the possibility of indirect influence by one’s choice on the decisions of other market participants;
• Public goods – how and why the presence of certain types of economic goods leads to economic inefficiency;
• Social choice theory, which is a branch of economics that aims to study the various ways and means by which society uses government agencies for its own needs.

Stages of development of microeconomics

Microeconomic science in its development went through four main stages:

Before 1871, there were no scientific works proposing a new system of economic thought instead of the classical one. However, works appeared that proposed some approaches that were subsequently included in the toolkit of microeconomic theory. In 1826, I. Thunen used differential calculation for the first time and proposed his own method of differential rent in the economics of space. The French researcher O. Cournot at the end of the 1830s described an option for analyzing enterprises on the market. In 1854, Hermann Gossen studied the psychological factors of economic behavior of economic entities and explained the laws of saturation of human needs.

The second stage lasts from 1871 to 1880. In 1871-1874, a “marginalist revolution” took place, which served as the impetus for the formation of a new discipline called “economic theory.”

The third stage lasts from 1890 to 1920. In 1890, the English economist A. Marshall published his own monograph, which later became the basic textbook in the field of microeconomics in the first half of the 20th century. His proposals consisted of a compromise version of determining market value using marginal utility and production costs; he formulated the law of supply and demand. Marshall's research was continued by A. Pigou, who analyzed situations of options and markets of a monopoly nature under government control, and the resulting market imperfections through taxes. At this stage, representatives of the mathematical school, using mathematics as a tool for economic research, formulated a quantitative approach to determine marginal utility, and also explained the equilibrium theory of the economy.

At the fourth stage, from 1930 to 1960, microeconomics is replenished with new discoveries. The situations of monopolistic oligopoly and competition described in publications of the 1930s are actively studied.

Note 1

Microeconomic theory studies the goals and means of individual economic entities, the conditions for the compatibility of their plans for economic activity, the mechanisms and directions of interaction between individual farms.

Features of microeconomics

The relationships between people in the economic system are complicated by the fact that in addition to relationships in production, they have relationships in the market for a given product and other market sectors, relationships with government agencies, and foreign economic relations. All these relationships relate to the object of study of economic theory. Microeconomics, which is part of this theory, has a similar object of study: economic life, economic activities of people and their relationships.

However, microeconomics also has distinctive features that give it the status of a special branch of economic theory.

The first feature is the focus of microeconomics on studying not the whole, but individual units of the economic system, in other words, participants in economic activity who independently make decisions and implement them in their economic life.

The second feature is that microeconomics is based on the initial assumption about the rationality of the actions taken by economic entities.

The third feature of microeconomics is the methods of analysis it uses. The principle of the limit approach is of particular importance.

Subject

Interaction of supply and demand. Market equilibrium. State regulation of prices: price flow and shortages; lower price level and surplus.

Equilibrium price or equilibrium price- this is the price at which the quantity supplied corresponds to the quantity demanded. It matches equilibrium quantity products on the market. The equilibrium price and equilibrium quantity are at the intersection of the supply and demand curves.

There are three types of equilibrium depending on the market period during which producers can make certain changes in factors of production: instantaneous equilibrium (Fig. 3.5a), short-term equilibrium (Fig. 3.5b), long-term equilibrium (Fig. 3.5c) .

Short-run equilibrium is established in a short market period. During the short term, manufacturers cannot change their production capacity, technical base, or amount of equipment.

Long-term equilibrium occurs in the long term. It can be long enough for existing firms to be able to adapt all resources to change production.

Consumer preferences. Cardinalist and ordinalist theories of utility.

Founders marginal utility theory are W. Jevons (1835-1882), L. Walras (1834-1910) and representatives of the Austrian school of economic theory of the last third of the 19th century. - beginning of the 20th century: K. Menger (1840-1921), F. Wieser (1851-1926), E. Böhm-Bawerk. They believed that the value of a product cannot be determined by the costs of living labor or all factors of production. It is determined by the utility of the product, which is assessed by the consumer, namely marginal utility.

At the core marginalism as directions of economic theory lie the following main principles:

1. Rational human behavior in a market economy.

2. Rarity or limited availability resources or goods.

Functional connections.

The law of decreasing demand in the theory of market economics is associated, first of all, with the law of diminishing marginal utility. The basic concepts of marginal utility theory are "utility", "total utility" and "marginal utility".

Utility is the ability of a product or service to satisfy human needs.

Overall usefulness- this is the consumer’s assessment of the total utility of the purchased quantity of a good or service. Since overall utility is a subjective concept, when evaluating identical units (portions) of the same product, it will differ from person to person depending on their tastes and preferences.

Marginal utility can be defined as follows:

,

where MU (marginalutility) is marginal utility;

DTU (totalutility) - change in total utility;

DQ - change in the quantity of consumed products

The cardinalists (cardinal - main, main) believed that marginal utility can be measured using, for example, the conventional unit "util". In their opinion, if n consumer goods are sold in the economy in quantities x 1, x 2, x 3, ..., x n, then their total utility for the consumer can be represented in the form of a cardinal utility function:

TU = TU(x 1, x 2, x 3, ..., x n).

The marginal utilities of additional units of a good can be represented as partial derivatives of total utility:

Unlike cardinalists, ordinalists believe that since marginal utility is a purely subjective category, it cannot be measured quantitatively. They introduce “ordinal” utility, with the help of which it is impossible to measure the degree of satisfaction of consumer needs, but it is possible to determine whether it has increased or decreased.

Maximizing profit by a company in the short term: the principle of comparing gross income with gross costs. The principle of comparing marginal revenue with marginal costs (maximizing profits, minimizing losses, liquidating a company.)

Determination time competitive the company of the optimal the most profitable production volume, providing it with maximum gross profit or minimum gross loss in the short term, Two principles (approaches) can be used:

1) comparison of gross revenue (gross income) with gross costs;

If gross revenue exceeds gross costs and the firm earns gross profit, then the product should be produced.

A company should produce in the short term in two cases:

1) if it receives gross economic profit;

2) if it incurs a gross loss, but in a smaller amount than the value of its fixed costs, i.e. Due to the gross revenue received from the sale of products, it will cover all variable costs and part of the fixed ones.

2) comparison of marginal revenue (marginal income) with marginal costs.

The company must produce the optimal quantity of products at which it will receive the maximum gross profit or, in the absence of one, will incur a minimum gross loss.

To the company It is advisable to carry out production in the short term if gross revenue (gross income) at certain volumes of output exceeds total variable costs (TC>VC).

The Gross Profit Maximization Case For a company to receive gross economic profit, it is necessary that the gross revenue curve at certain production volumes exceeds the gross cost curve

Case of minimizing gross loss In order for a firm to not receive a gross economic profit at any level of production, but to incur losses, but it should not stop production, it is necessary that the gross revenue curve for all output volumes be below the gross cost curve, but for certain production volumes exceed the curve variable costs.

Case of closure For a company to decide to stop production, it is necessary that the gross revenue schedule at all levels of output be located not only below the gross schedule, but also below the variable cost schedule

Land market and rent.

Earth– these are resources that are given by nature itself (natural resources) and can be used to produce goods and services.

Land as a factor of production has the following features :

1) unlike other factors of production, land is not reproducible at will, i.e. its quantity is limited;

2) in its origin it is a natural factor, and not a product of human labor;

3) land cannot be moved, freely transferred from one industry to another, from one enterprise to another, i.e. she is motionless;

4) land used in agriculture, when used rationally, not only does not wear out, but also increases its productivity.

The conclusion follows from this: whoever owns or uses land receives certain advantages. In this regard, it is important to distinguish between two concepts: “land ownership” and “land use”.

Land tenure means the right of a given (individual or legal) person to a certain plot of land on historical grounds. Most often, land ownership refers to the right to own land. It is carried out by land owners.

Land use is the use of land in the prescribed manner. The user is not necessarily the owner. Most often, in real life, subjects of land ownership and land use are personified by different persons. In this regard, special economic relations arise between them, generating special income and its special economic form - land rent.

There are two concepts of rent. In a broad sense rent - This is income from capital, property, land, and other natural resources that does not require its recipients to engage in entrepreneurial activity. In this case, rent is the income that the owner receives from providing any property resources for use by other individuals and legal entities.

However, economic science also uses a narrower concept - economic rent. Economic rent - is the price paid for use land and other natural resources. In other words, economic rent is mainly land rent.

The price of any resource depends on supply and demand. Accordingly, the amount of land rent is determined by the demand for land and its supply on the market.

Since the amount of land is limited, and in its original form it is a free and irreproducible gift of nature, the supply of land will be completely inelastic, i.e. The supply graph is a vertical line.

Demand on land is derived from the demand for products manufactured on this land. It therefore depends primarily on the demand for the product, as well as the quality, fertility and location of the land (especially when used for non-agricultural purposes). The land demand graph is decreasing due to the law of diminishing demand for goods produced on this land and the law of diminishing returns.

Due to the constancy of the supply of land, land rent as its price is completely determined by the demand for land (Fig. 11.1). The lower it is, the lower the value of land rent, other things being equal.

The peculiarity of land rent compared to other resource prices is that it does not perform a stimulating function, those. does not lead to an increase in land supply. For example, high wages for a certain type of labor will help expand the supply of workers for this type of labor. A high level of land rent, especially in modern conditions when land has been developed, will not lead to an increase in the supply of land, since its quantity in nature is limited.

The rent obtained as a result of the use of more fertile, productive and conveniently located land is called differential rent. There are differential rent I, associated with the natural fertility and location of the land, and differential rent P, obtained as a result of the artificial fertility of the land, the efficiency of investments made in the land (reclamation, fertilization, use of technology, etc.).

Characteristics of microeconomics as a science. Methodology of microeconomics.

Microeconomics studies economic categories, principles, laws, models, problems of effective use of limited resources by subjects of microeconomics in order to achieve the greatest economic benefit and maximum satisfaction of their economic interests. It explores economic behavior, the economic choice of microeconomic subjects in the process of production, distribution, exchange and consumption of material goods and services in conditions of limited resources.

Subject macroeconomics is the state, which is understood as the totality of all government agencies, government bodies designed to regulate the relationships of microeconomic entities, exercise, if necessary, control over their activities, and strive for the maximum realization of public national interests.

The objects of microeconomics research are economic indicators that characterize the activities of the relevant entities.

Microeconomics performs the following functions:

1) studies the economic categories that determine the activities of various economic units (utility, demand, supply, profit, etc.);

2) explores the economic behavior of microeconomic subjects in various market conditions;

3) clarifies economic principles and laws that allow business entities to make the most effective and rational decisions and make optimal choices;

4) studies the interaction of various economic units as part of larger market structures, for example, the industry as a whole (sellers of a certain type of product, buyers of a specific type of resource, etc.);

5) serves as a methodological basis for forecasting production development and studying market conditions;

6) examines the impact of the state on firms and households (for example, regulation of monopolies).

Microeconomics uses methods of analysis characteristic of economic theory as a whole: induction and deduction, abstraction, modeling, etc.

Induction refers to the derivation of general and particular principles, laws, models and theories from facts.

Deduction refers to the transition from the general to the specific, from principles, laws, models, theories to facts.

Abstraction is a mental distraction, separation from certain minor aspects, properties or connections of objects, processes and phenomena in order to highlight their main, essential connections and features.

One of the methods of microeconomics is modeling, which allows you to study economic processes based on the construction of their models. An economic model, as noted above, is a simplified diagram or conventional description, a conventional image of economic reality.

When studying microeconomic processes, verbal, mathematical, tabular and graphical models are used.

Economic theory occupies a special place in the system of humanitarian and socio-economic disciplines. It does not consider society as a whole, but only the sphere of its economic life, i.e. economic ties, relationships, economic behavior of people. In the broad sense of the word economic theory – is the science of using scarce resources to produce and exchange goods and services to satisfy needs; about public wealth.

The emergence of microeconomics occurred in economic theory relatively recently - in the 30s of the twentieth century. Microeconomics associated with the economic activities of individual economic entities(enterprises, firms, consumers, households, wage workers, entrepreneurs, traders, etc.), it helps to understand why certain decisions are made at the lowest level of the economy. Macroeconomics associated with the functioning of the national economy as a whole, studies general economic processes at the level of society(national income production, unemployment, inflation, etc.) and shows what measures the state needs to take in order for society to prosper. You can also highlight mesoeconomics, studying the behavior of intermediate systems or sectors of the national economy (agricultural, military-industrial complexes, etc.) and supermacroeconomics (world economy), explaining the behavior of the world economy, the world economy as a whole.

Representing a part of economic theory, microeconomics has a number of its own distinctive features, features, which give it specificity, make it a special section of economic theory. First feature is that microeconomics pays attention to the study not of the whole (the economy of the entire country), but of individual economic units (principle of economic atomism) 2 . Second feature microeconomics – its reliance on the initial assumption about the rationality of the actions of economic entities, i.e. the subject determines, on the one hand, the benefits of his actions, and on the other hand, the costs and compares them with each other (principle of economic rationalism). Third feature microeconomics is associated with the methods of analysis it uses. It is important for a subject of microeconomics (firm) to structure its economic activity in such a way that the additional (i.e., marginal) benefit exceeds the additional (marginal) costs (principle of the limit approach).

As subject of modern microeconomics the economic relationships associated with the efficient use of limited resources should be recognized; decision-making by individual economic entities in conditions of economic choice 3. Main object microeconomics as a science focuses on people as subjects (agents) of a market economy. Thus, microeconomics studies economic life, people's activities and their relationships. Therefore, microeconomics is primarily considered the science of the behavior of economic entities. To such subjects primarily include enterprises or companies And households . The household – this is one, two or more people united by common income and property for consumer purposes.

On the one hand, households appear as sellers of some factors of production in the corresponding factor markets and recipients of income from their sale, and on the other hand, as buyers who use their income to purchase consumer goods in the corresponding markets. Firms are both buyers of factors from households and producers of goods needed by households. An economic subject is also state , but microeconomics considers it mainly as a factor external to the economy. The state ensures that the economy functions normally and that its subjects comply with established laws and regulations, taking the necessary measures against violators. Economic entities can be different public associations and organizations . These are societies for the protection of consumer rights, associations to combat drugs, prostitution, pornography, etc. 4

In conditions of limited resources, economic entities are forced to make choices in order to solve the following questions 5: what to produce (what needs to satisfy); how to produce (from what resources, using what technology); for whom to produce. Modern microeconomics studies how these issues are resolved.

Thus, microeconomics– a science that studies economic processes at the level of individual economic entities and the relationships between them, individual economic processes and phenomena.