I had to read this book for my Microeconomics class. While I thought the class was particularly difficult, this text was actually pretty easy to read. The premise of microeconomics rests on the principle of supply versus demand. As demand for a product rises, the supply diminishes. This makes the products price rise by necessity. This is easily seen by the state of the oil market. In recent days, the oil market has seen a flood of extra supply called a “glut.” This happened in part because the Iranian sanctions were lifted. When this happened, Iran was able to export a massive amount of oil. OPEC tried to regulate the market, but with Iran’s refusal, there was a huge influx of oil. This caused oil prices to plummet. Excessive supply means less demand which means the price is lower.
In other areas covered by this text are the idea of different kinds of structures in a competitive market. In a true competitive market, there is a lot of competition and relatively little profits. For example, convenience stores are a great example of a true competitive market. They all have mostly identical services and products that they sell and there is relatively little overhead for a business to open a convenience store. This allows other entrepreneurs to enter the market with ease. As more stores come into existence, the competition increases and there is a greater chance that a store will go out of business. In other structures we see things like a monopoly. A monopoly occurs when an industry is controlled by one individual. This can, in some cases, be beneficial. For example, a water company that services a whole city may be more efficient if it is controlled by just that single company. This allows water prices to stay low and competition is non-existent. In other cases, it is quite illegal such as Standard Oil in the early 20th century. The government intervenes with anti-trust laws in such cases. I thought one of the most intriguing structures was the oligopoly. This means that there are very high entrance costs with just a few providers of the service. Cell phone companies are a good example of this: there are only 4 or 5 cell phone companies because in order to build the infrastructure required for cellular coverage. Because of this, cell phone companies have more sway over what they charge consumers.
Overall, the text was good. The class: not so good.