Question

Explain the subject matter of Micro Economics.

Answer 1

Microeconomics studies economic relationships and issues at the level of an individual- an individual firm, an individual household, an individual consumer. It is basically concerned with the determination of output and price for an individual firm or industry.

Components of microeconomics:

1) Theory of consumer behavior: It analysis how a consumer allocates his income to different uses so that he can maximizes his satisfaction.

2) Theory of producer behavior: It analysis how a producer exercises his choice on the use of different inputs and how he decides what to produce and how much so that he can maximize his profit.

3) Theory of price: It studies how prices of goods are determined in the commodity market and how prices of factor of production are determined in the factor market.