This document summarizes key principles of microeconomic analysis, including marginal reasoning, consumer and producer behavior, and the concept of limited rationality.
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[...] The calculation is always possible, there is just an adjustment of the framework of the situation in which the agents find themselves - procedural rationality: there is a limit to human capabilities, that is to say that even if an agent had all the available information on a market, it would not be able to process all this information (Herbert SIMON, 1957). There is both imperfect information since it is impossible to have all the information on a market and a limited ability to process information. Rationality is about choice procedures and not about pre-determination of behavior. [...]
[...] A configuration closer to reality but which marks a strong break with microeconomic logic. Example: The fuel shortage in spring 2016: Are French cars irrational? HuffPost 24/05/2016 Self-fulfilling prophecy (Merton, 1942): a self-fulfilling prophecy is when anticipation modifies behaviors and therefore provokes what was anticipated A self-fulfilling prophecy = a rational behavior at the individual level that leads to a deteriorated situation at the collective level SYNTHESIS FOR MICROECONOMIC ANALYSIS: each representative agent defends their personal interests and seeks maximum satisfaction and reasons with perfect rationality (i.e. [...]
[...] work/leisure: the opportunity cost of leisure is the lost salary) (e.g. overtime: extra salary worth 100 utility and fatigue worth -60 utility ? Net: 40 utility for an extra hour. If instead of doing this extra hour, one does a walk with friends: satisfaction worth 90 utility and cost that can be calculated only with the previous solution, which corresponds to the opportunity cost, here 40 utility. So the Net is worth 50 for not doing an extra hour The 'cost' of a choice represents the loss of the other possibility. [...]
[...] Reference model: Pure and Perfect Competition defined by 5 assumptions: - atomism of agents - homogeneity of products - transparency of information (=perfect information) - free entry and free exit from the branch - perfect mobility of production factors In CPP the price is imposed on agents then, the Marginal Revenue is equal to the price (thus constant for the producer) Functioning of the competitive market : - short term: at least 1 fixed production factor with fixed costs and no change in branch - long term: all production factors are variable so variable costs in Ct If in the short term the activity can be profitable (i.e. other producers are attracted ? entries ? shift of the supply curve, a price that falls and a profit that decreases progressively. [...]
[...] However, he clarifies that these assumptions are not based on facts and that in reality it is obvious that Man does not have only the desire for wealth in life, but that to build one must base oneself on assumptions. The criticisms of the HO model: Emile Durkheim ? economists would not have taken into account a number of considerations that form the real Man Thus: There are criticisms of this model that it would have a pretension to universality that would not be valid. But there are also defenders who speak of the need to formulate hypothetical reasoning to build a political economy. [...]
