CLEP Microeconomics covers the fundamental concepts of microeconomic theory, including supply and demand, market structures, and the behavior of consumers and firms.
Microeconomics explores how consumers and producers make decisions to maximize happiness (utility) or profit.
Consumers aim to get the most satisfaction, or utility, from their spending. Each extra unit of a good gives a little less satisfaction—this is diminishing marginal utility.
People make choices within their income limits. They try to get the biggest "bang for their buck" by comparing the extra utility per dollar spent on each good.
Producers want to maximize profit. They do this by analyzing costs and revenues, and by deciding how much to produce.
Both consumers and producers use marginal analysis: weighing the benefit of one more unit against its cost.
These behaviors explain shopping habits, why companies advertise, and how businesses set prices.
You choose a combo meal instead of just fries because you get more value for a little extra money.
A bakery decides to bake more cupcakes if the expected extra revenue is higher than the extra cost.
Consumers seek happiness, producers seek profit, and both make choices using marginal analysis.