WHAT IS MICRO ECONOMICS

WHAT IS MICRO ECONOMICS

Micro eCOn0Mics is also called Price Theory, The word micro is derived from the Greek word 'MIKROS' which means one-millionth part i,e, very small. It does not mean that the theory itself is very small.

"Micro Economics is the study of some small part of the whole Economy."

Following important problems, theories and behaviours are studied in Micro economics.

1. THEORY OF CONSUMERS' BEHAVIOR

In this thcory we try to understand how consumers decide about their purchases and what factors affect their decisions. This theory studies the demand side of the economic problem.

2. BEHAVIOR OF THE FIRM

In this theory, we discuss the basic problems of the firm i.e., what to produce? How to produce? Where to produce? How much to produce? For whom to produce? This theory examines the supply side of the economy.

3. PRICE THEORY

In this theory, keeping in view the demand and supply sides, we study how the price of a single commodity is determined.

4. THEORY OF INCOME DISTRIBUTION

In this theory, we examine that how the national income is distributed among various F.O.P. In other words the principle, according to which wages, rent interest and profit are determined, is studied under this head.

LIMITATIONS

Microeconomics analysis cannot give an idea of the functioning of an economy as a whole. An individual industry many are flourishing, whereas the economy as a whole, may be languishing. We cannot apply the result derived from the Micro Analysis to the whole  economy.

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