Economics is a social science which studies the way a society chooses to use its limited resources, which have alternate uses, to produce goods and services and to distribute them among different groups of people. The study of economics can be broadly divided into two branches – Microeconomics and Macroeconomics.
What is Microeconomics?
Adam Smith is considered to be the founder of the branch of economics known as microeconomics. The term “micro” has been derived from the Greek word “mikros” which means small. Microeconomics deals with the study and analysis of the economic action of a single individual unit of an economy, like a consumer or a firm or a small group of individuals. It analyzes individual economic relations or issues like households, firms, consumers etc. Its main tools are demand and supply. Microeconomics is that branch of economic theory that studies the behavior of individual units of an economy. Individual income, individual output, price of a commodity etc. are examples of micro economic concepts.
The main objective of microeconomics is determining the price of a commodity or factors or production. It can also be said that microeconomics has the objective of analyzing the principles, policies and problems for the achievement of the goal of optimum allocation of resources. The concept of microeconomics is very important because it gives us the foundation for most of our understanding of the functioning of the economy.
Microeconomics shows how and why certain goods have certain values, how individuals make more efficient or more productive choices, and how they can best coordinate and cooperate with each other. Microeconomics is the study of the economic tendencies of an individual unit of an economy. It shows us the likely outcome based on an individual’s choices or change in the factors of production. It does not show us or try to explain what should happen in the market, but it explains and shows us the expected outcome if certain conditions change.
Microeconomics Class 12 Notes – Chapter 1