Microeconomics
Microeconomics ( gr μικρός Mikrós "small", οἶκος oikos "house" and autonomy ), and microeconomics or micro- theory is a branch of economics. Where the term microeconomics is primarily used interchangeably in the literature. However, some authors distinguish between microeconomics as science and microeconomics as their object of study.
Its subject is the economic behavior of individual economic agents ( households and firms). It analyzes the decision-making problems and coordination operations that are necessary due to the division of labor in the production process and the allocation of scarce resources and goods through the market mechanism. In particular, the micro-economics markets to be investigated in which buy and sell goods and services. In addition to the actors on these markets and market structures ( monopoly, oligopoly, Polypol ) are taken into account and the respective institutional frameworks. A central concept is the market equilibrium, which adjusts itself through the formation of prices.
The second important branch of economics is macroeconomics. In contrast to microeconomics, macroeconomics is working with aggregate sizes, so for example with the total income of all households. Microeconomic statements can not be summed up easily to macroeconomic meaningful statements, what is the mindset of the individual to the overall economy. However, many macroeconomic model assumptions can be justified microeconomically. The technical term for the procedure is micro-foundation.
- 3.1 neoclassical
- 3.2 Other Perspectives
- 4.1 Total and partial analysis analysis
History
Usually called Adam Smith as the founder of Microeconomics (or classical economics ). In his work, The Wealth of Nations (1776 ), he examines, inter alia, the pros and cons of the market mechanism. Above all, he discovered how can arise from individual self-interest economic benefit.
End of the 19th century began with the marginalist revolution, the mathematization of economic analysis, which resulted in the economics focused on quantifiable phenomena ( volumes and prices ) and for "economic science" narrowed, who studied the behavior of buyers and sellers in markets.
Since the 50s of the 20th century, the economics continuously expanded its field of application. By Gary S. Becker many new areas of economic analysis were subjected, as in politics, law, family, organization, or history.
Subregions
First, the classic areas of microeconomics should be considered.
Financial theory
The budgetary theory deals with the demand side in the goods market. Important object of study here is the benefit that a demand by the cart, the quantity of all goods which he buys at a certain period, has. For this preference relations and Konvexitätsannahmen play an important role. For the consideration of preference relations in particular the Transitivitätsannahme and the completeness assumption of preferences are important. Due to the assumptions of a rational actor to indifference curves can be described.
Production Theory
This contrasts with the production theory, which deals with the supply side of the goods market. Starting from a given production function, which gives the ratio of input to output factors is investigated, which production quantities are to be produced with which input factors.
Price theory
The price theory examines the price formation as a result of the coming together of supply and demand in markets under different forms of competition and the conditions for achieving and stability of a market equilibrium.
In teaching at universities neoclassical microeconomics has special meaning. This works just like the other branches of economics with mathematical models.
Newer approaches and related disciplines
In addition to these three basic parts (household theory, production theory and price theory ) to other approaches have emerged:
- In the New Institutional Economics and the transaction cost theory factors such as asymmetric information, bounded rationality and opportunism are considered in order to arrive at a more realistic assumptions.
- Game theory extends the micro-economics to the successive interactions of multiple market participants (strategic behavior). In the risk theory of dealing with statistical uncertainty or unequal distribution of information is considered.
- The evolutionary economics not been studied in contrast to the neoclassical microeconomics the formation of market equilibria, but it examines the dynamics of economic processes.
- The Experimental Economics deals with the experimental verification of theoretical behavioral assumptions of microeconomics.
- Behavioral economics seeks explanations for behavior that contradicts the assumption of rational Nutzenmaximierers.
- Econometrics is concerned with the quantitative, usually empirical study of economic activity. These mathematical methods of statistics and stochastics are used and released test hypotheses.
Model assumptions
Abstract models in microeconomics, as generally in economics, often used. This has the advantage that concrete issues for intellectual penetration be made manageable in this way. There are only a few fundamental assumptions which apply everywhere in the economy.
If, for instance, the conditions according to Jevons ' law ( eg, there are no spatial or temporal distances ), one speaks of perfect markets. These are a theoretical model with very specific restrictive assumptions. In a perfect market there is for example no arbitrage opportunities, so that supply and demand at a common point, the market equilibrium, meet. But restrictive assumptions like the perfect market, complete information or the rationality of homo economicus can be abandoned, but require correspondingly more complex modeling.
The search for the optimal simplification and model building is a typical micro- economic problem: on the one hand, there are costs in terms of distance from reality, on the other is the benefit of simplicity. A greater degree of simplification that unfortunately is not associated with greater distance from reality. Also Simplification is a scarce commodity.
When it first to the question of how markets work, you will first of all look at the functioning of a single market. If the interaction of many or all Märkter be viewed simultaneously ( interdependence ), we speak of the theory of general equilibrium ( general equilibrium model).
Neoclassical
In particular, the mainstream neoclassical economic theory has some standard assumptions:
- Homo economicus: Adoption individually rational behavior ( presence of a complete preference ordering, transitivity of preferences )
- Households: the pursuit of utility maximization
- Company: pursuit of profit maximization
- Perfect market (not necessarily Polypol )
- Full info
- No externalities
Other perspectives
Already in the 19th century, Gustav von Schmoller pointed out, the findings of psychology must find in economics more consideration. Representatives of behavioral economics suggest, for example from another man. This is also a bounded rationality is assumed in the doer. The Nobel laureate Daniel Kahneman and Vernon L. Smith of the year 2002, the behaviorist research recently introduced recognition. Another essential component of behavioral economics is the Prospect Theory ( New expectancy theory ), which is a psychologically realistic alternative to the expected utility theory.
Methods of investigation
Partial analysis and total analysis
There are two classical methods of economic and social science research:
- Partial analysis: It is investigated how the individual economic agent (household or business) in the Markets mediated exchange process inserts (household theory and theory of the firm ) and as such economic agents interact in a single product market. In the partial analysis is necessarily made use of the ceteris paribus assumption.
- Total analysis: It is considered the simultaneous interaction of all economic agents involved in the economic process.
Both the partial and in the total analysis focuses on the role of prices and the price system in the center of considerations ( price theory ).