Essential Graphs for Microeconomics

Essential Graphs for Microeconomics

Basic Economic Concepts

( Production Possibilities Curve

Nature & Functions of Product Markets
( Demand and Supply: Market clearing equilibrium

(Floors and Ceilings

(Consumer and Producer Surplus

(Effect of Taxes

Theory of the Firm
(Short Run Cost

(Long Run Cost

(Perfectly Competitive Product Market Structure

• Long run equilibrium for the market and firm-price takers • Allocative and productive efficiency at P=MR=MC=min ATC

(Imperfectly Competitive Product Market Structure: Pure Monopoly

(Imperfectly Competitive Product Market Structure: Monopolistically Competitive

Long run equilibrium where P=AC at MR=MC output

Factor Market
(Perfectly Competitive Resource Market Structure

Perfectly Competitive Labor Market – Wage takers Firm wage comes from market so changes in labor demand do not raise wages.

(Imperfectly Competitive Resource Market Structure

Imperfectly Competitive Labor Market – Wage makers Quantity derived from MRC=MRP (Qm) Wage (Wm) comes from that point downward to Supply curve.

(Market Failures - Externalities

Thinking on the Margin…

Allocative Efficiency: Marginal Cost (MC) = Marginal Benefit (MB) Definition: Allocative efficiency means that a good’s output is expanded until its marginal benefit and marginal cost are equal. No resources beyond that point should be allocated to production.

Theory: Resources are efficiently allocated to any product when the MB and MC are equal.

Essential Graph: