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The Concepts Behind Microeconomics

1 Minute Intro: Microeconomics

Q: What is microeconomics?

A: Microeconomics is the study of individual choices in markets. In microeconomics, we consider the role consumers and businesses play in the economy and how consumers and businesses make their economic decisions. 

Q: What’s the difference between microeconomics and macroeconomics?

A: Macroeconomics looks at entire countries and their economic performance. This means national employment numbers, trade deficits, exchange rates and so on. In microeconomics, we think local. This means considering why consumers are willing to pay more for organic groceries than other groceries or how Apple decides what price to charge for the newest iPhone. 

Q: So, why are consumers willing to pay more for organic groceries?

A: Consumers make decisions based on utility. In other words, we make decisions based on individual benefits, such as the health and environmental benefits of going organic. The more benefits a consumer feels a product provides, the more that consumer is willing to pay for the product.

Q: Why would a consumer pay more to buy the iPhone instead of an Android?

A: This is a question of opportunity cost. Opportunity cost is the value of making one decision over another. By choosing the iPhone over an Android, a consumer may gain something, like connectivity with other Apple devices – but lose something else, like more money spent. 

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