Microeconomics Made Simple Book Review
Why I Love Economics and You Should Too (Beer Included)
After considering many college majors; recreation (too vacuous), English (what am I going to do with this degree?), Nutrition (too much science), Psychology (don’t need to major in this to figure myself out), and a few others, I finally settled upon Economics. And that was the beginning of my love affair with econ. I believed then, and still do that Economics has the answer to many of our modern day questions. To this day, I read economics in my leisure time. In fact, I’m teaching a course on Behavioral Healthcare Economics at a local university this winter.
So when I came upon Frakt and Piper’s book, Microeconomics Made Simple, I was thrilled to check it out.
Piper, a personal friend, has a gift of brevity. He’s one of those individuals who knows how to separate the important from the trivial. Microeconomics Made Simple does not disappoint.
The Microeconomics Made Simple Table of Contents Says It All
Our attention spans are becoming shorter, as we desire to consume information in bite-sized nuggets. This book is perfect for today’s consumer. You may be impressed by how such a compact book is able to cover such a vast field of study.
The Introduction answers the questions; “What is Economics?” the differences between Micro and Macro economics, as well as the model’s shortcomings.
The first example of the “microeconomics field” includes an example about “beer”. Who doesn’t enjoy an econ book using beer as an example?
Microeconomics Made Simple
“Microeconomics could be used to study and describe the market for beer:
- How sensitive are consumers to changes in price? Do they buy significantly more if beer goes on sale?
- How do beer purchasers respond when the economy takes a nosedive? Do they drink more, because times are bad?
- How do brewers decide how much beer to produce and at what price to sell it?”
Are you curious whether economic conditions influence beer consumption? Microeconomics explains that beer tends to be an “inelastic” commodity whose consumption is relatively stable regardless of the strength in the economy?
Microeconomics in Less Than 100 Pages is Just Right
Chapter One, “Maximizing Utility” begins with the global issue, how to obtain the greatest amount of life happiness given one’s limited resources. This chapter rapidly transitions to address the accusation that maximizing utility or happiness might be seen as selfish with the first subheading, “What about charity?” Not to imply that “happiness” is selfish, the authors explain how utility includes many aspects of fulfillment including the spiritual satisfaction from charitable acts.
Piper and Frakt go on to discuss “Decreasing Marginal Utility” – another fascinating topic with spending and happiness applications.
From beer to pie.
“Think about how you feel when you take your first bite of your favorite pie: it makes you happy, offering you very high utility. What about after you’re finished a slice and you’re digging into your second? It doesn’t make you quite as happy because you’re fuller and the flavor is familiar. That is, the utility from the second slice is lower than the utility from the first.”
This decreasing marginal utility concept can help you understand and make better decisions. Why would you continue to buy more expensive gadgets, when the pleasure from each successive purchase diminishes?
Supply and Demand
You may think you understand this concept, but knowing a bit more of the “economics” behind these elementary ideas will give you an understanding of business in two quick chapters.
Are you interested in the “sweet spot” of when to buy a new technology without overpaying and before the technology is obsolete?
The supply and demand chapters show what factors go into the prices of our day to day goods. The simple supply and demand graphs, along with discussion of costs of production give you a foundation to understand the “outsourcing” discussion in the media.
Microeconomics comes to life with the examples, charts, and graphs.
Opportunity Costs Combined with Costs of Production
The discussion of Pauline’s frozen pizza business raises life decisions which impact many of you at one time or another.
Imagine that Pauline brings in $100,000 of revenue per year and $60,000 of accounting costs. This gives Pauline an accounting profit of $40,000 per year.
Should Pauline run her frozen pizza business for the $40,000 yearly accounting or run a similar frozen ravioli business where her accounting profit would be $50,000?
In economic terms, Pauline is giving up $10,000 per year by running the frozen pizza business in lieu of the frozen ravioli business. It is assumed that Pauline would like to maximize her economic utility or profit. Thus, by running the pizza business instead of the ravioli business she is $10,000 worse off.
Business Concepts Unwrapped
Competition, Monopolies, and Oligopolies are also discussed. With the presence of major companies such as Google, Microsoft, along with the proliferation of new start ups, these chapters give the readers a framework in which to understand the complex business landscape. The book sheds light on how seeming monopolies can exist as well as the strong competitive pressures throughout the business environment.
Every chapter ends with a simple summary to solidify the concepts, refreshes your learning, and apply the concepts to real life.
The concluding chapter, “The Insights and Limitations of Economics” gives you an understanding of the benefits of global free trade. This final section integrates the lessons of the book with attention to the flawed aspects of “microeconomics”.
Microeconomics Made Simple is not a book you will sit down and read cover to cover in one sitting. The breadth of information recommends consuming the book in several sittings. Let the concepts sink in and allow the information to seep into your understanding of our world.
For students and curious adults who desire insight into how businesses and humans are governed in their economic behavior, this is a solid addition to the literature. It’s a great refresher of basic Microeconomics topics and an introduction for those unfamiliar with this field of study.