those choices are coordinated and compatible with the choices of everyone else. Equilibrium is the solution or outcome of an economic model. Economic models fall into two categories: Microeconomics and macroeconomics. Microeconomics is the branch of economics that studies the choices of individual households and firms. Because it analyzes the behavior of economic units, microeconomics is a most important social science. Microeconomics theory is used to analyze various circumstances and outcomes from decision making. In addition, microeconomics provides foundations for scientists of other social disciplines. Microeconomics is a highly useful tool in business management, aiding in planning, finance, and marketing. However, microeconomics is not limited to business applications. Government administration, political science, history, social- behavior, and much more can be viewed through the lens of microeconomics. What do microeconomics tell us? Careful analysis using microeconomic models answer those questions dealing with technological change, production and consumption, wages and earnings. Economic concerns involving unemployment, inflation, and the differences in wealth among nations are macroeconomic. A major cog in the microeconomic machinery is the concept of scarcity. This is easily summed up as the universal state in which wants exceed resources. Scarcity fuels production, the conversion of land, labor, and capital into goods and services. Services are made up of intangible commodities such as haircuts, phone calls and cab rides. Goods are tangible cars, socks, VCRs, and bread. Goods are classified as either capital goods, i.e., those goods with long term use such as buildings cars, computers, etc., or consumption goods. Consumption goods are items that can be used one time only, such as pickles and toothpaste. Finite resources and the available technologies limit what can be produced in terms of goods and se...
