📈 Microeconomics

What you’ll learn

1. Scarcity and ChoiceDefine economics as the study of choice under scarcity and distinguish micro/macro and positive/normative reasoning.Economics studies how people and firms make choices when wants exceed limited resources, with microeconomics focused on individual decision-makers and specific markets. It separates positive claims (testable descriptions) from normative ones (value judgments) and assumes people respond to incentives.
2. Opportunity CostExplain opportunity cost, the production possibilities frontier, and why sunk costs should be ignored.The real cost of any choice is its opportunity cost — the next-best alternative forgone — illustrated by the production possibilities frontier's trade-offs. Sunk costs, already spent and unrecoverable, should not influence current decisions.
3. Thinking at the MarginIntroduce marginal analysis and diminishing marginal utility as the basis of rational choice.Most decisions are made at the margin, comparing the extra benefit and extra cost of one more unit. Because marginal utility diminishes, the rule for optimal choice is to act until marginal benefit equals marginal cost.
4. What Buyers Do: DemandState the law of demand, read a demand curve, and distinguish movements along it from shifts of it.The law of demand says quantity demanded falls as price rises, giving a downward-sloping curve. A change in the good's own price moves along the curve, while income, tastes, substitute prices, and the number of buyers shift the whole curve.
5. What Sellers Do: SupplyState the law of supply, read a supply curve, and identify what shifts supply.The law of supply says sellers offer more at higher prices, giving an upward-sloping curve. The good's own price moves along the curve, while input costs, technology, taxes, and the number of sellers shift it.
6. Where They Meet: EquilibriumExplain market equilibrium, shortages and surpluses, and prices as signals.Equilibrium is where supply and demand cross and the market clears. Prices above equilibrium cause surpluses and prices below cause shortages, while the price itself acts as a signal that coordinates buyers and sellers automatically.
7. ElasticityDefine price elasticity of demand, identify elastic vs. inelastic goods, and connect elasticity to tax incidence.Elasticity measures how strongly quantity responds to price; demand is elastic for luxuries with substitutes and inelastic for necessities. The less elastic side of a market bears more of any tax, regardless of who legally pays it.
8. Value and Consumer ChoiceResolve the diamond-water paradox with marginal value and introduce consumer surplus and budget allocation.Price reflects marginal, not total, value, which explains why abundant water is cheap and scarce diamonds are dear. Consumer surplus is the value buyers get above what they pay, and rational consumers spend a budget to equalize value per dollar across goods.
9. Behind Supply: Costs of ProductionConnect supply to production costs: fixed vs. variable costs, diminishing returns, and economies of scale.Supply reflects costs, split into fixed costs that don't vary with output and variable costs that do. Diminishing returns make marginal cost rise (pushing supply upward), while economies of scale can lower per-unit cost as output grows.
10. Perfect CompetitionDescribe perfect competition and why long-run economic profit is driven to zero.Perfect competition features many price-taking firms selling an identical product with free entry and exit. Entry and exit drive long-run economic profit to zero and price to minimum cost, and the constant competitive pressure rewards efficiency.
11. Monopoly and Market PowerDefine monopoly and market power, and place real markets on the competition spectrum.A monopoly is a single price-making seller protected by barriers to entry; it restricts output and raises price, causing deadweight loss. Most real markets fall between competition and monopoly, as monopolistic competition or oligopoly.
12. Price Controls and TaxesAnalyze price ceilings, price floors, and taxes and their efficiency costs.Price ceilings below equilibrium cause shortages and price floors above it cause surpluses, as with rent control and the minimum wage. Taxes drive a wedge that shrinks the market and creates deadweight loss, with the burden split by relative elasticity.
13. When Markets Fail: ExternalitiesExplain externalities and why they cause markets to over- or under-produce.Externalities are spillover costs or benefits on third parties: negative externalities like pollution and congestion are overproduced, while positive externalities are underproduced. Fixes internalize the spillover through taxes, regulation, or subsidies.
14. Public Goods and InformationClassify goods by rivalry and excludability and explain public goods and asymmetric information.Goods sort into private, public, common resources, and club goods by rivalry and excludability; markets underprovide public goods and overuse common resources. Asymmetric information, as in the market for 'lemons,' is another source of market failure addressed by warranties and disclosure.
15. Labor Markets and IncomeApply supply and demand to labor markets and explain wage differences and the limits of markets.Wages are prices set by labor demand (a worker's marginal revenue) and supply, so scarce, productive, hard-to-train skills earn more. Microeconomics shows both the power of markets to coordinate and the specific failures — monopoly, externalities, public goods, bad information — where they fall short.

Questions this course answers

Grounded in trusted sources

• N. Gregory Mankiw, 'Principles of Microeconomics' (Cengage)
• OpenStax, 'Principles of Microeconomics 2e' (openstax.org, free/CC-licensed)
• Paul Krugman & Robin Wells, 'Microeconomics' (Worth Publishers)
• Adam Smith, 'An Inquiry into the Nature and Causes of the Wealth of Nations' (1776)
• George A. Akerlof, 'The Market for Lemons: Quality Uncertainty and the Market Mechanism' (1970)
• Alfred Marshall, 'Principles of Economics' (1890)

Every Wunder lesson is built from real, reputable sources — never invented.

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