What is Microeconomics?
Definition: Microeconomics is the study of individuals, households and firms' behavior in decision making and allocation of resources. It generally applies to markets of goods and services and deals with individual and economic issues.
Microeconomics is the social science that studies the implications of incentives and decisions, specifically about how those affect the utilization and distribution of resources. Microeconomics shows how and why different goods have different values, how individuals and businesses conduct and benefit from efficient production and exchange, and how individuals best coordinate and cooperate with one another. Generally speaking, microeconomics provides a more complete and detailed understanding than macroeconomics.
Microeconomics involves several key principles, including (but not limited to):
Demand, Supply and Equilibrium: Prices are determined by the law of supply demand. In a perfectly competitive market, suppliers offer the same price demanded by consumers. This creates economic equilibrium.
Production Theory: This principle is the study of how goods and services are created or manufactured.
Costs of Production: According to this theory, the price of goods or services is determined by the cost of the resources used during production.
Labor Economics: This principle looks at workers and employers, and tries to understand patterns of wages, employment and income.
The rules in microeconomics flow from a set of compatible laws and theorems, rather than beginning with empirical study.
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