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The emergence of microeconomics
Published on July 31, 2018 24 min
Other Talks in the Series: Introduction to Microeconomics
Welcome to the series of talks, "Introduction to Microeconomics". My name is Dr. Sangaralingam Ramesh. In this first talk, we'll be discussing the emergence of microeconomics and the contributions to the development of microeconomics, from ancient Greek philosophy and philosophers in the 18th and the 19th century.
When we consider microeconomics, we need to understand what microeconomics is actually about. In this context, economics is split into microeconomics and macroeconomics. Macroeconomics is about the study of the wider economy, total demand and total supply in economy of a country, whereas microeconomics is about the study of individual markets. For example, the demand and supply of footballs. Microeconomics emerged from the scholarly works of ancient Greek philosopher, such as Aristotle, who had first started began to ask questions as to what value is and how goods and services are valued, and these ideas were then taken up by economists, philosophers, such as Adam Smith in the late 18th century, and then Stanley Jevons in the early part of the 19th century.
So, in the context of the development of microeconomics, we should also understand the difference between economic analysis and a pure description of economic activities. Now, in the case of Aristotle, who coined the term 'oeconomia', which is basically 'household management' in ancient Greece was about sourcing supplies for the household and how the household would sell the goods and services which it produced. For example, it could be a farming household. However, Aristotle did no work or thinking on how prices are actually quantifiable, and neither did he do any work on interest rates or the distribution of income. So, in this case, we need to distinguish between economic analysis, the quantification of economic activity, and a pure description of economic activities, buying and selling goods. So, what's the difference between economic analysis and a pure description of economic activities? According to the famous economist, Joseph Schumpeter, who was active in the early part of the 20th century, economic analysis involves exerting intellectual efforts to better understand economic phenomena, such as why goods and services are produced, how they're sold and quantify this in specific ways, for example, by using a demand equation and a supply equation, quantifying the demand curve and the supply curve, the point at which these two curves meet gives us the concept of market equilibrium.