A Little History

From the late 1700s through the early 1900s, economists devoted the bulk of their inquisitive mental efforts to refining and perfecting the principles of demand, supply, and markets with the goal of understanding prices. Other key contributors to the development of microeconomics during this period includes Thomas Malthus, David Ricardo, John Stuart Mill, Jeremy Bentham, William Stanley Jevons, and Alfred Marshall.

Problems and Issues

Most microeconomic analysis has focused on the question of efficiency, achieving the highest possible level of satisfaction from available resources. Like most microeconomics, this begins with the market and its assorted components--demand, supply, price, equilibrium, efficiency, competition.

The study of market demand leads into the analysis consumer demand and utility. The study of market supply leads into the analysis of production and cost.

From there microeconomics moves into such broad topics as market structures, factor markets, the public sector, and international trade. Microeconomic theories and principles are also used to analyze a wide variety of issues, including crime, poverty, health care, environmental quality, resource depletion, and voting behavior.

Alternative Theories

The basic market theory is then tweaked by modifying key assumptions for alternative explanations of market structures, including perfect competition, monopoly, oligopoly, and monopolistic competition. Further modifications provide theories of public goods and externalities.

Further modifications generate useful explanations of assorted issues, problems, and topics, giving rise to distinct theories of crime, voting, firm relocation, public choice, international trade, and many, many more.

Politics and Policies

Microeconomic policies generally take the form of legislative laws, administrative rules and regulations, executive orders, or judicial decisions.

Among the early efficiency-improving policies were antitrust laws, established in the United States in the late 1800s and early 1900s, aimed at correcting the problems of monopoly and market control.

Later microeconomic policies addressed the inefficiency problems of externalities and imperfect information through government agencies, including the Food and Drug Administration, Environmental Protection Agency, and Consumer Product Safety Commission, that regulated economic activity.

Other policies relying on government taxation and spending authority have dealt more specifically with equity concerns. The Social Security system and welfare program are among the most noted.