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Micro economics is the branch of economics which studies the behaviour and decisions of individual economic units such as consumers, firms, workers and markets. It focuses on individual prices, individual output, individual income and allocation of resources in specific markets.
Definition (exam style): Micro economics is the study of individual units of the economy and their interrelationships in determining prices and output in particular markets.
Micro economics includes:
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Micro economics is the branch of economics which studies the behaviour and decisions of individual economic units such as consumers, firms, workers and markets. It focuses on individual prices, individual output, individual income and allocation of resources in specific markets.
Definition (exam style): Micro economics is the study of individual units of the economy and their interrelationships in determining prices and output in particular markets.
Micro economics includes:
Resources are limited but human wants are unlimited, so scarcity arises. Scarcity forces individuals and society to make choices about how to use resources.
Opportunity cost is the cost of the next best alternative foregone when a choice is made. It reflects the real sacrifice in decision-making.
Economic problem arises due to scarcity of resources and unlimited wants. The central problems are:
PPC shows different combinations of two goods that can be produced with given resources and technology.
Key points of PPC:
Micro economics uses marginal concepts:
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Scope of micro economics includes consumer behaviour and demand theory, production and cost analysis, and price determination under different market structures like perfect competition and monopoly. It also covers factor pricing (rent, wages, interest and profit) and basic welfare analysis such as consumer surplus and efficiency in allocation of resources.
Micro economics helps in understanding price determination and market equilibrium. It is useful for business decisions like pricing, output and cost control. It helps government in framing policies related to taxation, subsidies, price control and regulation. Micro analysis also explains allocation of scarce resources and helps improve efficiency and consumer satisfaction.
Micro economics is the branch of economics that studies individual economic units such as consumers, firms and particular markets. It explains how individual prices and output are determined and how scarce resources are allocated among alternative uses.
Nature/features of micro economics: Micro economics studies individual units and therefore uses partial equilibrium analysis, examining one market while keeping other things constant (ceteris paribus). It is also called price theory because it explains determination of prices of goods and factors. Micro economics uses marginal analysis through concepts like marginal utility, marginal cost and marginal revenue. It focuses on allocation and efficiency of resources at micro level.
Scope of micro economics: The scope includes theory of consumer behaviour and demand, utility analysis and indifference curve, theory of production and costs, and pricing under different market structures such as perfect competition, monopoly, monopolistic competition and oligopoly. It also covers factor pricing (rent, wages, interest, profit) and basic welfare analysis such as consumer surplus and efficiency.
Thus, micro economics provides a detailed understanding of market behaviour and price determination in individual markets.