Basic tools of economics are: Tables, Graphs, Charts, Verbal statement.
What Are The Basic Tools Of Micro Economics?
The basic tools of the micro economics are demand and supply. According to demand function, the demand for goods depends upon the price of the good, (P) the income of the consumer, (Y) the price of the substitute (Ps) and the taste of the consumer (T). So we say:
Qd= f (P, Y, Ps, T)
As in the law of demand it is stated that the other things remaining the same, the quantity demanded depends upon the price and there exists an inverse relationship between price and quantity demanded.
By others things remaining the same it means that income of the consumer (Y), the price f substitute (Ps) and the taste of the consumers (T) do not change. Accordingly, the law of demand is as:
QD = f (P).
According to supply function the supply of a goods depends upon the price of the good (P), the costs of production ©, the techniques of production (T) and weather conditions (W) remain as they are hence the law of supply is as
Qs = f (P)
In the competitive economic system the price of a product is settled where its demand is equal to its supply. This means that the equilibrium in the market is restored through the operation of free forces of demand and supply.
Qd= f (P, Y, Ps, T)
As in the law of demand it is stated that the other things remaining the same, the quantity demanded depends upon the price and there exists an inverse relationship between price and quantity demanded.
By others things remaining the same it means that income of the consumer (Y), the price f substitute (Ps) and the taste of the consumers (T) do not change. Accordingly, the law of demand is as:
QD = f (P).
According to supply function the supply of a goods depends upon the price of the good (P), the costs of production ©, the techniques of production (T) and weather conditions (W) remain as they are hence the law of supply is as
Qs = f (P)
In the competitive economic system the price of a product is settled where its demand is equal to its supply. This means that the equilibrium in the market is restored through the operation of free forces of demand and supply.
The basic tools of microeconomics are demand and supply curves. Behind derivation of the demand curve, there is analysis of the consumer's behaviour. Analogously, behind the derivation of supply curve, there is analysis of the producer's behaviour.