economics_for_manager, Role in market equilibrium.

May 20th, 2015
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The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households.

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Group1Definition:- The branch of economicsthat analyzes the marketbehavior of individualconsumers and firms in anattempt to understand thedecision-making process offirms and households.Principles of Microeconomicsa. Scarcity Principle- An economic principle in which a limited supply of agood, coupled with a high demand for that good,results in a mismatch between the desired supplyand demand equilibrium. Because of this, peoplemust make choices among different items due totheir unlimited wants but limited resources.b. Opportunity CostPrincipleThe cost of an alternative that must beforgone in order to pursue a certain action.Put another way, the benefits you couldhave received by taking an alternativeaction.c. Cost - BenefitPrinciple-A principle that says a person shouldtake an action if, and only if, the extrabenefit from taking it is greater than theextra cost.d. Voluntary ExchangePrincipleThe principle of voluntary exchange isbased on the notion that people act in theirown self-interest. Self-interested peoplewont exchange one thing for another unlessthe trade makes them better off. (Wikipedia2014)e. Diminishing ReturnsPrinciple- A principle that states that there is adecrease in the marginal (per-unit) outputof a production process as the amount ofa single factor of production is increased,while the amounts of all other factors ofproduction stay constant. (wikipedia 2014)f. Incentive Principle- A

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