Explain the scope and subject matter of micro economics.
Microeconomics is defined as the study of individuals, households and firms' behavior in decision making and allocation of resources. The scope and subject matter of microeconomics is as follow:
1. Product Pricing
The main principle in microeconomics is product pricing or price mechanism. Prices of individual commodities are determined by market
forces of demand and supply.
2. Factor Pricing
Microeconomics deals with the pricing of factors of
production like land, labour, capital and entrepreneur. All factors contribute
in production process. These factors get rewards in the form of rent, wages,
interest and profit respectively.
3. Welfare Theory
Micro economics also deals with the optimum allocation of resources
and maximisation of social welfare.
Microeconomics is defined as the study of individuals, households and firms' behavior in decision making and allocation of resources. The scope and subject matter of microeconomics is as follow:
1. Product Pricing
The main principle in microeconomics is product pricing or price mechanism. Prices of individual commodities are determined by market forces of demand and supply.
2. Factor Pricing
Microeconomics deals with the pricing of factors of production like land, labour, capital and entrepreneur. All factors contribute in production process. These factors get rewards in the form of rent, wages, interest and profit respectively.
3. Welfare Theory
Micro economics also deals with the optimum allocation of resources and maximisation of social welfare.
