For investors, the rules of microeconomics can illustrate industry dynamics and explain why some companies or industries make better investments than others.
For example, investors will want to look for industries that lean toward monopoly, as that gives them pricing power and helps them block out competition.
Additionally, investing in companies that sell inelastic products, such as medicine, can also be a smart move, as this allows them to raise prices with little pushback.
Similarly, products with few substitutes also lend themselves to pricing power. The Apple (AAPL -1.66%) ecosystem of tech devices offers a good example of this since it's difficult to create the complementarity of an iPhone, Mac, AirPods, etc., with a group of devices from a competitor.