What is Microeconomics?
Microeconomics is a branch of economics that contemplate 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 is referred 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 more 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 coincidentally the father of economics. According to Smith, the government does not tamper with the economy, a country’s resources will be most effectually utilised, free-market issues will fix themselves and a nation’s welfare and best interests will be agreed.
However, Smith’s opinions on the economy predominated for the next 2 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 economic theory.
Examples of Microeconomics
The microeconomics analyses the traits of the “small” economic factors (like workers, households, companies) and Macroeconomics the “large”, economic units (like capital investment, consumption, GTP, unemployment). However, microeconomics and macroeconomics study the corresponding concepts at various levels. The below mentioned are representative examples of microeconomics:
- Demand: 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: 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 can decide to go to an academy or begin a company who doesn’t have enough time or money to do both.
- Consumer Choice: This is to determine, how the needs, assumptions and data influence and shape the customer choices. The notion that the customers maximise their anticipated utility of purchases; this implies that they purchase the things they assume to be most useful to them.
- Welfare Economics: Creating the influence of social programs on economic choices such as labour participation or risk-taking.
The above mentioned is the concept that is explained in detail about ‘Introduction to Microeconomics’ for the CBSE class 12 Commerce students. To know more, stay tuned to BYJU’S.
Students can refer to the related concepts below:
- What is Simple Economy?
- What are the Central Problems of an Economy?
- Organisation of Economic Activities
- Centrally Planned Economy
- Market Economy