Theme 3 · Microeconomics · Papers 1 and 3
Business behaviour and the labour market
Microeconomics inside the firm. How costs, revenue and profit behave, how the market structure a firm sits in shapes its choices, and how wages and employment are set in the labour market.
Topics in this theme
Topic pages
Business growth
Why firms grow or stay small, organic versus integrated growth, and the reasons some demerge.
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Business objectives
Profit maximisation and the alternatives: revenue maximisation, sales maximisation, and satisficing.
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Revenues, costs and profits
Total, average and marginal revenue and cost; short-run and long-run costs; economies and diseconomies of scale; normal and supernormal profit.
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Market structures
Perfect competition, monopolistic competition, oligopoly, monopoly and monopsony; efficiency, contestability and price discrimination.
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The labour market
The demand for and supply of labour, wage determination, and the effects of a minimum wage and of monopsony employers.
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Government intervention
Competition policy, regulation of monopoly and the labour market, and the limits of intervention.
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The template
Diagram-heavy theme: cost and revenue curves, and the market-structure diagrams, do a lot of the work here. Each page follows the worked example in Theme 1.