• Subject Name : Economics

Microeconomic Analysis Report



Models and Theories.

Classical microeconomic theory.

Utility maximisation.

Neo-classical theory.

Economic Issue.


Allocation of the Choices and Scarcity.


Introduction to Issues in the Australian Market

The microeconomic analysis is the concern that is related to the economic decisions and can be attained with the attained actions of individuals and firms. The purpose of the paper is to understand the “Market” for the product and situation along with identifying the models and the theories. The economic analysis for the market is the derived behaviour of the consumer with the given quantity and the price (Mazzucato, 2016). For example, if it is the normal good like the salt or sugar and the price has changed, the good would still be demanded as firstly it is the necessary good and secondly there is no substitute. Similarly, for the luxury good like the Cruises or Travelling, people would be insensitive to the price change, as the prices are high and more taxing or higher prices, would discourage the people to buy, besides there are many substitutes available. For any goods and the services, the demand and the supply re equated to form the equilibrium price and the quantity for the product. The demand is the consumer behaviour prediction for the product, while the supply is the producer supply for the given good (Kopp, 2017).

Models and Theories

The theory is defined, as the broad approach of the consumers (micro-level every individual) are interacting with the industries, sectors and the output (at a macro level) to form the market for the certain product (Jacobsson, 2017). For example, if the individual consumer is demanding a car, the consumer is trying to purchase the car good with the set price and purchasing it. If the together the individuals or the group of the consumers are demanding a certain car (such as sports utility or the SUV) then it is said the consumer demand has increased for the certain product. There would-be a likeliness of the increased prices of the car commodity and petrol (as this is the complementary good which has to purchased). The theory can be divided as the neo-classical theory, along with placing the assumptions of the free-markets and even identifying the assumption individuals who would hold rational and even seek ways of maximising utility (Ghemawat, 2017). A theory of economics considers the interaction in between the two or more variables interact with each other and it is also defined with the interaction with each other (Geiger, 2018).

Classical Microeconomic Theory

The theory was propounded by Adam Smith famous economists along with David Ricardo. The theory is stated as below-:

Adam Smith has mentioned how there can be ‘invisible hand that could recreate the market.’ The theory notes, how the people can interact with the self out interest and it is important to support the market that could tend to provide the goods and services that could be demanded by the population (Carr, 2018). It is also one of the central factors of the price setting, and there can be market forces that would be responded that can be changed in demand along with the supply, such as the shortage pushes that would be based on the price and leading to falling in the demand (Dumbrell, 2020). The theory has also founded with the division of labour, specialisation and even with the identified economies of scale. Further, the theory has even given the costs to firms and consumers.

Utility Maximisation

The theory provides a detailed understanding of the utility and how to maximize it, that was done with the development classical economics theory proposed by the philosophers/economists by the name of Jeremy Bentham and John Stuart Mill. The microeconomic theory helps to identify how the consumer will buy goods and it would be dependent on the marginal utility (satisfaction) from where it can get good. The theory has also been advocated with the rational consumers that have been seeking to maximise the satisfaction (Mazzucato, 2016).

Neo-Classical Theory

As per the theory, it is also the modern re-interpretation that has been identified during the nineteenth century. The theory has advocated with the markets, having a set developed new ideas, that has been linked to the utility and rational choice theory. The theory elements are as follows-:

  1. To identify the market distribution of goods along with the services.
  2. To form the rational choice theory, which is the interaction of the individuals that could hold the rational preferences and it is based on the rational choices, that could help to maximize the outcomes, such as the profit, wages and even with the consumption or investment (Jacobsson, 2017).
  3. People who have acted independently would also be available to make use of the and the given available information.
  4. Marginalism-: The theory states how in the neo-classical economics, there would be more emphasis on the placed concepts of the marginal utility along with having the marginal cost concept. it is the choices, that could depend on the satisfaction derived from one extra unit of a good (Moriarty, 2020).

Australian Economic Issue

Economic problems are defined as the problem of the human behaviour that has to be interacted to meet the ends meets and how there can be scarce means to find alternative uses. For example, when there are the crises of the petrol, which is one of the necessary good, with the high prices and the low supply fo the Petrol, it would lead to the cascading impact on the economy. As petrol is a necessary product with alternatives like the diesel and the CNG, but still as the petrol prices rise so does the diesel and the CNG prices do. This leads to high priced petrol goods, with the low choices on the alternatives and the reduced supply of petrol in the market (Jacobsson, 2017). The consumers would still buy as the product is inelastic, and the consumers even tough sensitive to the pricing are still required to pay, due to lack of choices and lack of the alternatives. As there has been a problem of the choices, the economics is all about the necessary choices and building with the demand. The choice of the consumers would be dependent on the limited resources that hold an alternative uses and as there has been disposed of.

Housing Commodity Pricing

Housing is the major issue in the Australian Market, as the houses (commodities) are less and due to the high demand of the housing particularly in the Melbourne, Sydney etc. there has been a steep rise demand of the houses. The prices are high at the PR and the quantity supplied from the Q0, so naturally there is a crises and there is a shortage. During the COVID 19 the rented shops, shopping malls have vacated the premium housing and it has lead to the housing market to crash. As due to the Pandemic situation the economy has fallen to negative GDP, low demand of customers and the prices are still steep high (as the houses are the inelastic goods which cannot be made immediately and requires a longer time to be made.) So the goods here are inelastic which cannot readjust as per the market equilibrium. It has caused the market failure to respond, during the crises time.

The economics problems are also over the economy's finite resources and there would be the insufficient means that could satisfy all human wants along with the set needs (Kopp, 2017) The study of the Economists is all about how to allocate the resources and how to have the conditions that could be based on the scarcity. Another finding is how the society can allocate the resources and how there can be the conflation of normative that could be based on the economic planning, having a set choice of the economic agents that define within the conditions (Mazzucato, 2016)

In economics mainstream neoclassical economics, it is assumed that humans pursue their self-interest and that the market mechanism best satisfies the various wants different individuals might have. These wants are often divided into individual wants (which depend on the individual's preferences and purchasing power parity) and collective wants (which are the wants of entire groups of people). Things such as food and clothing can be classified as either wants or needs, depending on what type and how often a good is requested (Moriarty, 2016).

As per the Economics, the problem can be of the characterized with the "how" to produce with the given "technological problem" that could lead to efficiency. It is also the problem of the allocation as to what can be the choices and of the problem to experience the "economic problem" (Moriarty, 2020). Within the free market, the main identified problems are of the "how" a production along with the resources allocation can be identified and distributed through the economic agents. Further, in the centrally planned economy, there can be the principal that could decide as to how and what to produce as per the agents.

Method of Issues in the Australian Market

Allocation of the Choices and Scarcity

The method which has been taken is of the free market equilibrium and facing the problem of the low choices, low alternatives and the problem of the scarcity

Here from the graph, one can see that the demand for the good has risen, due to the lack of choices, there has been a price rise and the quantity supply has decreased slightly. The demand curve moves from the D1 to the D2 and the Supply curve moves from the S1 to the S2 (Moriarty, 2020).


Due to the lack of alternatives, such good would come back to point E 1 (initial) levels through the constant interaction of the demand and the supply. The solution is the more production and the more supply. In he long term it would equate due to the time period and with the market constant interaction. Through the government action such as taxes, subsidizing and providing quota restrictions can help to maximize the revenue.

Conclusion on Issues in the Australian Market

 It is concluded, that the problem of economics is based on the free market equilibrium of having the set prices and the equating quantity. The demand is the consumer behaviour would be based on the product, while the supply is the producer supply for the given good. The goods having an equilibrium price and the set quantities for the given market.. The consumers have the choices and people can buy, besides there are many substitutes available. For any goods and the services, the demand and the supply re equated to form the equilibrium price and the quantity for the product. 

References for Issues in the Australian Market

Carr, M., & Tanczer, L. M. (2018). UK cybersecurity industrial policy: an analysis of drivers, market failures and interventions. Journal of Cyber Policy3(3), 430-444.

Dumbrell, N. P., Adamson, D., & Wheeler, S. A. (2020). Is the social licence response to government and market failures? Evidence from the literature. Resources Policy69, 101827.

Geiger, S., & Gross, N. (2018). Market Failures and Market Framings: Can a market be transformed from the inside?. Organization Studies39(10), 1357-1376.

Ghemawat, P. (2017). Market and management failures. Capitalism and Society12(1).

Jacobsson, S., Bergek, A., & Sandén, B. (2017). Improving the European Commission’s analytical base for designing instrument mixes in the energy sector: Market failures versus system weaknesses. Energy research & social science33, 11-20.

Kopp, E., Kaffenberger, L., & Jenkinson, N. (2017). Cyber risk, market failures, and financial stability. International Monetary Fund.

Mazzucato, M., & Penna, C. C. (2016). Beyond market failures: The market creating and shaping roles of state investment banks. Journal of Economic Policy Reform19(4), 305-326.

Moriarty, J. (2020). On the origin, content, and relevance of the market failures approach. Journal of Business Ethics165(1), 113-124.

Steinberg, E. (2017). The inapplicability of the market-failures approach in a non-ideal world. Business Ethics Journal Review5(5), 28-34.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Economics Assignment Help

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