Plain-language explanation.
Microeconomics studies how individuals, households, and firms make decisions and how these interact through markets — setting prices, allocating resources, and generating or failing to generate social welfare.
Core concepts and standard treatment.
Core microeconomics covers demand and supply (demand curve — downward sloping; supply curve — upward sloping; market equilibrium — consumer surplus, producer surplus, total welfare; shifts vs movements along curves; price ceiling and floor — deadweight loss), elasticity (PED = %deltaQ/%deltaP; elastic vs inelastic; cross-price — substitutes vs complements; income elasticity — normal vs inferior goods; PES; total revenue and PED), consumer theory (budget constraint — indifference curves — MRS = Px/Py at optimum; income and substitution effect — Slutsky equation; Hicks and Marshallian demand), and the theory of the firm (production function — TPP, MPP, APL; law of diminishing returns; short-run cost curves — TC, FC, VC, AFC, AVC, ATC, MC; LRATC — economies and diseconomies of scale; perfect competition — P=MC=minATC long-run; monopoly — MR=MC — deadweight loss; monopolistic competition — product differentiation).
Deeper theory, debates and edge cases.
Advanced microeconomics covers game theory (Nash equilibrium — Prisoners Dilemma; repeated games — folk theorem; Bertrand vs Cournot vs Stackelberg; signalling — Spence job market; auctions — first price, second price — Vickrey — revenue equivalence theorem), information economics (adverse selection — Akerlof Market for Lemons; moral hazard — principal-agent; insurance markets — co-payments; information asymmetry in healthcare — Arrow), welfare economics and market failure (first and second welfare theorems; Pigouvian tax and subsidy; Coase theorem; public goods — non-rival, non-excludable — free-rider; common pool resources — Ostrom governing the commons; natural monopoly regulation — RPI-X), and applied microeconomics (labour economics — monopsony — minimum wage — Card and Krueger quasi-experiment; human capital — Becker; Ramsey optimal taxation; Mirrlees income tax; QALY — NICE threshold — cost-effectiveness).
How it is applied in practice.
At the economist and competition authority adviser level, practitioners contribute to AER; advise on competition policy (CMA — merger control — SLC test; SSNIP test; predatory pricing — Chapter 2 Competition Act 1998; EC DG COMP — Article 102 TFEU); lead economic regulation (Ofgem RIIO-T2/ED2; Ofwat PR24; ORR Network Rail access charges); contribute to policy evaluation (ONS Labour Force Survey; OBR EFO forecasts; HMT Green Book CBA — NPV of public projects); and advise on antitrust economics (damages quantification — before-and-after; difference-in-difference; cartel overcharge econometrics).