What Is Microeconomics ?
Microeconomics studies how individuals and business make decisions regarding allocation of limited resources. It is concerned with single economic actors such as individuals, firms, consumers etc. It analyzes the behavior of individuals and businesses to understand how they fulfill their expectations and needs by utilizing the scare resources.
Why Is Microeconomics Important ?
The main advantages, importance or uses of microeconomics can be highlighted as follows:
1. Optimal Production Decision
Business firms want to increase their profit by the use of limited resources. Microeconomics helps to take wise decision regarding production and procedures to reduce the cost of the products.
2. Proper Employment Of Available Resources
It helps proper employment or allocation of limited resources to improve productivity and profitability of the firm.
3. Helps To Set Price
Microeconomics helps the firm to set the price of the product because it is related to demand and supply analysis, theory of product price and factor price.
It is useful to understand the behavior of individuals and their level of satisfaction.
5. Formulation Of Policies
Microeconomics is very useful for the government to formulate and evaluate economic policies which helps to know their effectiveness.
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6. Promotes International Trade
Another importance of microeconomics is that it promotes international trade by providing valuable information about external and internal trade, balance of payment, foreign exchange rate etc.
7. Helpful To Study Macroeconomics
It studies the economic behavior of individual unit or a group which is helpful in the study of whole economy or macroeconomics.
Key Benefits Of Microeconomics In Short
* It helps to optimize production process by improving resource allocation
* It is helpful to determine optimal price
* It can be applied in personal finance areas such as budgeting, investing etc.
* It helps the firms in wage determination
* It is helpful in designing and evaluating financial policies
* It helps to understand consumer behavior
