What is Microeconomics?
Microeconomics is a part of economics that contemplate the traits of decision makers within the economy, such as households, individuals and enterprises. The term ‘firm’ is usually used to refer to all sorts of trade. Microeconomics distincts with the study of Macroeconomics, which considers the economy as an entity.
Concepts covered under Microeconomics
- Dearth, choice and opportunity cost: The manifesto on which microeconomics notion is built reclines at the very heart of economic reasonability– how decision-makers pick between scanty resources that have substitute uses. Customers demand goods and services and producers proffer these for sale, but none of the individuals can acquire everything they require from the economic system.
- The price mechanism: A prime part of the study of microeconomics is committed to the investigation of how prices are determined in the market place. Manufacturers and customers initiate forces that we term them as supply and demand accordingly and it is their interaction within the market place that devises the price mechanism.
- Demand: Demand is initiated by the needs of customers and the nature of demand incurs much to the basic worth that customers discern the goods or services to possess. The degree of demand for the goods or services is determined by various factors, namely :
- Price of the goods or services
- Price of other goods and services, alternatives and contingents
- Tastes and proclivity
Also Read: Introduction to Microeconomics
- Demand Curve
- Supply: Supply refers to the number of goods and services proffered to the marketplace by the manufacturers. We can delineate the association between quantity demanded and price, we can also contemplate the link between the quantity supplied and the price.
- Supply Curve
- Elasticity: The concept of elasticity is solicited with the receptivity of quantity demanded or quantity supplied to a variation in price. If a minute variation in price brings about an enormous change in quantity demanded, the price elasticity of demand is said to be highly elastic. On the contrary, if a variation in price has minute or nil effect on the quantity demanded, the demand is said to be highly inelastic.
Additional Reading: Difference between Microeconomics and Macroeconomics
- Equilibrium: Presuming all determinants of supply and demand are to be persistent except the price, an enterprise will manufacture where the supply curve converges the demand curve.
- Market Intervention: In capitalist structures, authorizing markets to handle freely is contemplated to be advantageous, but it is predominantly agreed fact that market forces cannot be allowed to operate for all the goods and services obligatory by the community. Some goods and services are termed as ‘public goods and services’, which means that they can only be furnished sufficiently by the intervention.
- Maximum Price
- Theory of the firm or an enterprise: The theory of an enterprise is a branch of microeconomics that scrutinizes the distinct ways in which entities within an industry may be organized and pursued to procure lessons from these substitute structures.
The above mentioned are the concepts that are covered under the topic Microeconomics. To know more, stay tuned to BYJU’S.