Microeconomics definition
Microeconomics is a branch of economics that contemplates the attributes of decision makers within the economy, such as households, individuals, and enterprises.
The term ‘firm’ is generally used to refer to all sorts of business activities. Microeconomics differ from the study of macroeconomics, which considers the economy as an entity.
To put it in other words, microeconomics refers to the social science that analyses the associations of human action, particularly about how those choices influence the consumption and allocation of scarce resources.
The concept of microeconomics shows how and why different commodities have different values, how individuals make more practical or efficient decisions, and how individuals organise and cooperate with each other.
Who is the Father of Microeconomics?
Adam Smith is considered the father of microeconomics, who is also the father of economics. According to Smith’s philosophy of free markets, there should be minimum government intervention and taxation in free markets.
His idea of an invisible hand- which is the tendency of free markets to regulate themselves by means of competition, supply and demand, and self-interest was popular at that time.
Smith’s opinions on the economy predominated for the next two centuries; however, in the late 19th and early 20th centuries, the views of Alfred Marshall (1842–1924), a London-born economist, had a significant influence on the economic theory.
Examples of Microeconomics
Microeconomics analyses the traits of the small economic factors (like workers, households, companies), and macroeconomics analyses the large economic units (like capital investment, consumption, GTP, unemployment). However, microeconomics and macroeconomics study the corresponding concepts at various levels. The representative examples of microeconomics are:
- Demand: This is how the demand for commodities is determined by income, choices, cost prices, and other circumstances, such as expectations.
- Supply: This is to ascertain how manufacturers determine to enter markets, scale production, and exit markets.
- Opportunity cost: It is the compromises or the trade-offs that the individuals and enterprises make to accomplish restrained resources such as money, time, land, and capital. For instance, an individual who decides to go to an academy and begin a company may not have enough time or money for both.
- Consumer choice: This is to determine how the needs, assumptions, and data influence shape the customer choices. The notion that customers maximise their anticipated utility of purchases implies that they purchase the things they assume to be most useful to them.
- Welfare economics: It refers to creating the influence of social programs on economic choices such as labour participation or risk-taking.
This is the introduction to microeconomics for CBSE Class 12 commerce students. Stay tuned for questions papers, sample papers, syllabus, and relevant notifications on our website.
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