. the greater part of human actions have their origin not in logical reasoning but in sentiment. This is particularly true for actions that are not motivated economically. . Man, although impelled to act by nonlogical motives, likes to tie his actions logically to certain principles; he therefore invents these a posteriori in order to justify his actions. Vilfredo Pareto, The rise and fall of the elites (1968, p. 27) | MICROECONOMICS Principles and Analysis Frank A. Cowell STICERD and Department of Economics London School of Economics December 2004 ii Contents Contents iii List of Tables xiii List of Figures xv Preface xxiii 1 Introduction 1 The rôle of microeconomic principles. 1 Microeconomic models. 2 Purpose. 2 The economic actors. 2 Motivation . 2 The economic environment . 3 Assumptions and axioms . 4 Testing a model. 4 Equilibrium analysis. 5 Equilibrium and economic context. 5 The comparative statics method . 5 Dynamics and stability . 6 Background to this book. 6 Economics . 6 Mathematics . 6 Using the book. 7 A route map. 7 Some tips. 7 2 The Firm 9 Basic setting . 9 The firm basic ingredients . 10 Properties of the production function . 12 The optimisation problem . 19 Optimisation stage 1 cost minimisation. 20 The cost function. 23 .
