Microeconomic Models


  • Basic Supply and Demand is the most important model in economics.  It shows how free markets are able to allocate resources without instructions from a central authority.
  • Two Goods - Two Prices explains the origin of the demand curve for a good.  This analysis is the foundation for the Theory of the Consumer.
  • Perfect Competition and Monopoly and Monopolistic Competition explore the foundation for the supply curve for a good.  These models are the central elements of  the Theory of the Firm.

Advanced Supply and Demand

  • Who Pays a Sales Tax? is an interesting application of basic supply and demand principles.  It emphasizes thinking like an economist and directs attention to the importance of considering the slopes of the supply and demand curves.
  • The Cobweb Model and Inventory-Based Pricing examines the basis for asserting that the equilibrium with  supply equal to demand is stable.

Industrial Organization

  • Price Discrimination, which is presented in terms of  Why Give Students an Educational Discount?, analyzes the nature of a market where firms maximize profits by offering different prices to different customers.

Labor Economics

The supply and demand for labor reverse the roles of utility maximizing behavior and profit maximizing behavior so that utility maximization explains the supply function and profit maximization explains the demand function.

Macro Foundations

  • Intertemporal Substitution applies the Two Goods - Two Prices Model to consumption in the present and consumption in the future.  This provides a framework for discussing interest rates.  Incorporating production possibility frontiers extends the analysis to include the decision to invest in education and the decision to save for retirement.


Jack Hirshleifer, Price Theory and Applications.

Hal R. Varian, Microeconomic Analysis.

Hischleifer is a classic intermediate micro text.  Varian will appeal to readers interested in the equations behind the models.