Explanation of Microeconomics
MICROECONOMICS
Microeconomics (from
Greek prefix mikro- meaning "small") is a branch
of economics that studies the
behavior of individuals and firms in making decisions regarding the
allocation of scarce recourses and
the interactions among these individuals and firms.
One goal of microeconomics is to analyze the market
mechanisms that establish relative
prices among goods and services and allocate
limited resources among alternative uses. Microeconomics shows conditions under
which free markets lead to desirable allocations. It also analyzes market
failure, where markets fail to produce eficient results.
Microeconomics stands in contrast to macroeconomics, which involves "the sum total of economic
activity, dealing with the issues of growth, inflation and unemployment and
with national policies relating to these issues". Microeconomics also
deals with the effects of economic policies (such as changing taxation levels) on the aforementioned aspects of the
economy.[4] Particularly
in the wake of the Lucas Critique, much
of modern macroeconomic theory has been built upon microfoundation—i.e.
based upon basic assumptions about micro-level behavior.
Source :
1.
Microeconomic is a
branch of economics that studies the
behavior of individuals and firmsin making decisions regarding the allocation
of scarce resources and the
interactions among these individuals and firms.
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2.
One goal of
microeconomics is to analyze the market mechanisms that
establish relative prices among goods
and services and allocate limited resources among alternative uses.
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3.
Microeconomics shows
conditions under which free markets lead to desirable allocations.
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