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Principles of Microeconomics
Although we have countless wants and needs, the resources available to meet those needs are scarce. Having more of one thing technically means having less of another. This is commonly known as the scarcity principle.
An individual organization should only take action if the extra benefits of undertaking such action are greater than the extra costs. This is called the cost-benefit principle.
A business or individual is less likely to perform an activity if the cost of the activity is on the higher end but more likely if the benefits of performing the same activity are high. This is the incentive principle.
A business can do better if employees focus purely on activities with the lowest opportunity cost. This is the principle of comparative advantage.
When expanding the production of goods, one should first apply the resources with the lowest opportunity cost and turn to those with higher opportunity cost afterward – the principle of lowering opportunity cost.
Types of market structures
Perfect competition In a perfect competition there are many sellers and buyers. All sellers here are in competition with each other and are small sellers.
Here there are many buyers and sellers but there is no direct competition because the products are not directly identical.
There are a few companies in this market
There is one seller in the market who control the market.
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