What Is Microeconomics?, The Clairifiers

 WHAT IS MICROECONOMICS?

The prefix 'micro' is derived from the Greek word 'mikros', meaning 'small'. Microeconomics studies the economic behaviour of individual economic units and individual economic variables. The unit of study in microeconomics is individual units rather than the entire economy, such as individual households, firms, and industries. Thus, the study of the economic behaviour of households, firms, and industries forms the subject matter of microeconomics. In other words, microeconomics is a microscopic study of the economy. For example, microeconomics is concerned with how the individual consumer distributes his income among various products and services so as to maximise his utility. Microeconomics also seeks to explain how individual firms decide at what price to sell the product, how much to produce, what amount of product will maximise their profit, and how to minimise the cost of production. In other words, microeconomics examines how resources are allocated among various individual firms and industries, how the prices of various products are determined, and how the output produced is shared among those who cooperate in the production of this output. Microeconomics also examines whether resources are efficiently allocated. It spells out the conditions for the optimal allocation of resources so as to maximise output and social welfare. Thus, microeconomics is concerned with the theories of product pricing, factor pricing, and economic welfare.

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