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UU Introduction to Economics and Business Economics - Summary for Varian Text 'Microeconomics' / 'Microeconomic Analysis'

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  • May 28, 2020
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  • 2019/2020
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Summary – Microeconomics – Varian:
Microeconomic Analysis (). Hal R. Varian.

Microeconomics  study of individual economic units and their interactions (deriving the
implications of the behaviour for the system as a whole)  it is concerned with particular
markets  it involves the individual decision-maker and choices.

Consumer (buys), producer (sells) and markets.

The distinction between micro and macroeconomics (aggregate variables) is blurring.

Difference in focus  distinguishing characteristic  both micro- and macroeconomics
attempt to describe the same behaviour, but from a different angle / approach.

Micro-dynamic (behaviour of a certain section) and macro-dynamic (behaviour of whole).
Ragnar Frisch was the first economist to use the terms of micro- and macro-dynamic.
Keynes did not use terms in his General Theory, but he was aware of the distinction.
De Wolff was the first economist to use the terms microeconomics and macroeconomics.

Macroeconomics = underemployment. Microeconomics = full utilisation of resources.

Full-employment macroeconomics  deals with equilibrium models in aggregate terms.
Microeconomic theories of unemployment  examines reasons for the existence of
unemployment.

Behaviour models  simplified representations of reality  relation between variables in a
system.

Relation between micro- and macroeconomics  studying the individual and accumulating
everything to create a whole.

Economic equilibrium (balance)  situation where no agent has an incentive to change any
of his choices given his perceptions of behaviour of other agents.

The art in model building consists in knowing what to leave out  leaving out irrelevant
factors that do not have influence on others.

Microeconomics of information  full information on part of all economic agents  more
conditions to be added in a model  conditions are important in determining behaviour of an
economic system.

Nano economics  study of constituent (part of a whole) parts of consumers, markets and
firms  understanding the internal functioning of economic institutions (firms / families /
markets).

Important Terms: underutilisation, comparative statics, competitive equilibrium (assuming
that the price of a good will not change when demand equals supply), parameters, maximising
behaviour, classical theory, competitive markets, imperfect competition (game theory), choice
behaviour.

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