Microeconomic Analysis - Producer, Consumer and Competitive Market Basics[Analyse Microéconomique - notions de base sur le producteur, le consommateur et le marché concurrentiel]

The allocation of scarce resources depends fundamentally on the economic system and the institutions that frame trade (market economy, command economy or mixed economy). This analysis deals with the allocation of resources in a market economy with private ownership of the means of production. In a market economy, goods and services are freely traded on the basis of relative prices resulting from the confrontation of supply and demand. The market economy combines the action of agents – consumers and producers – and the state, within a given institutional, social and cultural framework. There is private ownership of the means of production when the companies are owned by a part of the consumers, who are then shareholders and share the profits. Firms use labour and other factors of production, especially capital (K), to produce goods that they sell at a market price. Consumers use income from their labour (L), capital (if they are shareholders) and social income to buy the goods and services they want at market prices – they may face budgetary constraints in the face of different choices of goods and services. Amartya Sen points out that institutions – the state, the market, the legal system, social organizations, etc. – contribute to the proper functioning of market economies if they contribute to increasing human freedoms.