Foundations of Economics

Join us to gain knowledge on fundamental economic theories, their practical applications, and the foundations of economics. By exploring the basic principles and concepts that underpin economic analysis, you will gain a deeper understanding of how markets work, how resources are allocated, and how individuals, businesses, and governments make decisions about production, consumption, and distribution. Whether you are interested in pursuing a career in economics or simply want to better understand the world around you, our program provides a solid foundation for continued learning and growth.

how households maximize utility
Foundations of Economics, Economic Blog, Economics, Household Economics, Markets, Microeconomics

Household Optimization Problem

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In this article, you will learn how to formally describe the household optimization problem in your microeconomics. To understand how private households make their consumption and resource allocation decisions in the real world, we shall look at the crucial elements that affect optimal decision-making, e.g., price, income, and preference changes. A private household is one of the primary agents making economic decisions relevant to other economic agents, e.g., government and firms. Here is a revisit of the household maximization problem described in many microeconomic and economics textbooks. But with a clear outline and a better understanding of how households set goals, their opportunity cost optimization process, and the interpretation of outcomes.

Fundamentals of Microeconomics
Foundations of Economics, Behavioral Economics, Economics, Household Economics, Markets, Microeconomics, Mobility, Technology

Fundamentals of Microeconomics

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Microeconomics is a branch of economic theory that analyzes the decision-making of economic agents, including private households, firms, and government, in an economy. It factors in environmental conditions and various influences that affect choices related to consumption, production, and resource allocation. Microeconomics also explores how coordination mechanisms and social networks influence the outcomes of these decisions, highlighting possible conflicts between individual options and collective decisions.

Social Interaction
Personality, Behavioral Economics, Diversity, Economics, Foundations of Economics, Globalization, Leadership and Management, Social Life, Sustainability

Importance of Social Interaction

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Social interaction is fundamental for human well-being and societal evolution. It cultivates relational growth, community spirit, and support mechanisms, promoting empathy, understanding, and communication. Yet, individuals often require help navigating social environments, particularly in the digital age. As such, participation plays an indispensable role in personal and communal development. Additionally, understanding social conflicts stemming from differing ideas, beliefs, and status can lead to a more peaceful, equitable society.

Competitive and Complete Markets
Markets, Economics, Financial Markets, Foundations of Economics, Macroeconomics, Microeconomics

Competitive and Complete Markets

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Let us discuss the nature of competitive and complete markets in economics. A competitive market is characterized by multiple buyers and sellers who have no control over market prices. Conversely, a complete market involves trade in all possible goods with no future price uncertainty. While both types feature many market participants, they differ substantially regarding certainty about future prices. Markets play a crucial societal role, contributing to efficient resource allocation and allowing freedom of choice. However, market failures like externalities and information asymmetry drive the need for appropriate regulation.

Preferences and Utility Theory
Microeconomics, Behavioral Economics, Business Administration, Economic Blog, Economics, Foundations of Economics, Markets

Preferences and Utility Theory

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Preferences and utility theory are critical concepts in microeconomics, explaining household decision-making behavior. Preferences refer to how households make choices necessary to satisfy their needs when comparing bundles of goods. Utility theory uses mathematical concepts to express these preferences and elucidate household satisfaction levels. Rational preferences must meet completeness, transitiveness, continuity, convexity, and monotonousness. Various preferences exist, including substitutes, complements, perfect and imperfect substitutes, and perfect compliments. Preference and utility theory ultimately help derive the formal opportunity costs of alternatives in household theory.

Elasticity in Economics
Foundations of Economics, Economic Blog, Economic Policy, Economics, Microeconomics, Public Policy

Elasticity in Economics

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Elasticity in economics represents the sensitivity of economic parameters like demand, supply, and prices, among others, to changes in affecting factors. It includes price elasticity of demand, which assesses demand changes if prices increase, and income and cross-price elasticity in household theory. Additionally, direct and indirect price elasticity of demand are derived mathematically. Also, firm and market theories apply elasticity to assess the price sensitivity of input demand, production, firm supply, and market representation.

Demand in Economics
Foundations of Economics, Behavioral Economics, Economics, Markets, Microeconomics

Demand in Economics

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Demand in economics refers to the quantity of a good that consumers wish to consume under certain conditions. Price levels, income, consumer preferences, and market structures influence it. Economics students must understand the nature of individual household demand and aggregate market demand and its implications in various market situations such as monopsony, oligopoly, and perfect competition. Price and income elasticity, optimality conditions, and social interactions are crucial in shaping demand.

Production Technology in Economics
Foundations of Economics, Business Administration, Economics, Macroeconomics, Mathematics, Microeconomics

Production Technology in Economics

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Production technology in economics refers to the sum of all knowledge and capabilities of the society to combine scarce resources to produce final goods for consumption. This concept covers all industrial processes and exchanges within the value chain. The production function is the mathematical interpretation of production technology. Important concepts include the return to scale, the marginal product of inputs, and the change of marginal productivity. These concepts are also applied at both microeconomic and macroeconomic levels. The understanding of production technology requires some mathematical background.

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