Microeconomics

Economics is often defined as something along the lines of “the study of how society manages its scarce resources.” The starting point of most such studies is that individuals allocate their resources such that they themselves will get the highest possible level of utility.

An individual has an idea of what the consequences of different actions will be, and she chooses that action she believes will produce the best result for her. She is, in other words, selfish and rational.

Where does the demand curve come from? In order to explain why individuals choose different quantities at different prices, we will use a model with three components: