Microeconomics is that particular branch of economics, which focuses on analyzing how individual firms and consumers are behaving in the market with an intention to understand the procedure of decision making of the households and firms better. Microeconomics takes the interaction taking place between individual sellers and buyers as well as the factors, which influences the selection made by the sellers and buyers into consideration. Thus, in general, microeconomics pays attention to the patterns of demand and supply and determines output and price in different markets.
Microeconomics pays more attention towards the fundamental theories of demand and supply and the manner in which businesses take decision with regard to the quantity of products it needs to manufacture and the price it should charge for the same. Therefore, microeconomics takes the individual firms, industries and consumers into consideration.
Microeconomics studies the manner in which individuals, firms and households take decisions for allocating restricted resources, especially in markets where services or goods are sold and bought. Microeconomics determines the effects and impacts of such decisions as well as behaviors on the demand and supply for services and goods, which helps in determining their prices and in turn how these prices determine the demand and supply of the services and goods.
Microeconomics is also referred to as ‘the bottom-up view of the economy’. It helps in determining the manner in which people handle time, resources and money. The primary aim of microeconomics is to determine and analyze the mechanisms of the market, which establishes relative costs amongst services and goods and allocation of resources among several uses. Microeconomics also analyzes the failure of the market, where the markets are unable to produce desired results and also describes the theoretical situations required for creating perfect competitive environment.
What is Microeconomics Concerned with?
Microeconomics is essentially concerned with:
1. Cost of individual commodities is determined by the market forces of supply and demand. Thus, microeconomics does an analysis of the demand and analysis of supply.
2.Labour, land, entrepreneur and capital are the factors that contribute to the process of production. Thus, they are rewarded in the form of wages, rent, profit and interest respectively. Thus, microeconomics determines these rewards i.e. factor pricing.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software
Most WantedFinancial Terms
- Most Important Financial Ratios
- Debt-to-Equity Ratio
- Financial Leverage
- Current Ratio
- Interest Coverage Ratio (ICR)
- Solvency Ratio
- Break-even Point
- Debt Service Coverage Ratio
- Receivable Turnover Ratio
- Return On Capital Employed (ROCE)
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