The study of the operations of the components of a national economy, such as individual firms, households, and consumers.
microeconomic mi'cro·ec'o·nom'ic adj.
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The study of the operations of the components of a national economy, such as individual firms, households, and consumers.
microeconomic mi'cro·ec'o·nom'ic adj.The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).
Investopedia Says:
The field of economics is broken down into two distinct areas of study: microeconomics and macroeconomics. Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.
Macroeconomics, on the other hand, looks at the big picture (hence "macro"). It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why a 6% rate of unemployment is not necessarily a bad thing. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels.
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Study of the behavior of basic economic units such as companies, industries, or households. Research on the companies in the airline industry would be a microeconomic concern, for instance. See also Macroeconomics.
Study of the behavior of basic economic units such as companies, industries, or households. Research on the companies in the airline industry would be a microeconomic concern, for instance. See also Macroeconomics.
The branch of economics which deals with the choices of individual economic actors such as households and firms. Microeconomists are marginalists and use calculus extensively to build formal models of the interactions of numerous market actors in (and out of) equilibrium. Microeconomic models have been imported into politics by writers in the rational choice tradition.
For more information on microeconomics, visit Britannica.com.
Economic analysis of particular components of the economy, such as the growth of a single industry or demand for a single product. (Compare macroeconomics.)
Study of the economic behavior of individual, decision-making units, e.g. individual consumers or businesses, and the operation of individual markets. See also macroeconomics.
Microeconomics (or price theory) is a branch of economics that studies how individuals, households, and firms make decisions to allocate limited resources,[1] typically in markets where goods or services are being bought and sold.
Microeconomics examines how these decisions and behaviours affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the supply and demand of goods and services.[2][3]
Macroeconomics, on the other hand, involves the "sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national economic policies relating to these issues"[4] and the effects of government actions (e.g., changing taxation levels) on them.[5] Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations' — i.e. based upon basic assumptions about micro-level behaviour.
One of the goals of microeconomics is to analyze market mechanisms that establish
The theory of supply and demand usually assumes that markets are perfectly competitive. This implies that there are many buyers and sellers in the market and none of them have the capacity to significantly influence prices of goods and services. In many real-life transactions, the assumption fails because some individual buyers or sellers or groups of buyers or sellers do have the ability to influence prices. Quite often a sophisticated analysis is required to understand the demand-supply equation of a good. However, the theory works well in simple situations.
Mainstream economics does not assume a priori that markets are preferable to other forms of social organization. In fact, much analysis is devoted to cases where so-called market failures lead to resource allocation that is suboptimal by some standard (highways are the classic example, profitable to all for use but not directly profitable for anyone to finance). In such cases, economists may attempt to find policies that will avoid waste directly by government control, indirectly by regulation that induces market participants to act in a manner consistent with optimal welfare, or by creating "missing markets" to enable efficient trading where none had previously existed. This is studied in the field of collective action. It also must be noted that "optimal welfare" usually takes on a Paretian norm, which in its mathematical application of Kaldor-Hicks Method, does not stay consistent with the Utilitarian norm within the normative side of economics which studies collective action, namely public choice. Market failure in positive economics (microeconomics) is limited in implications without mixing the belief of the economist and his or her theory.
The demand for various commodities by individuals is generally thought of as the outcome of a utility-maximizing process. The interpretation of this relationship between price and quantity demanded of a given good is that, given all the other goods and constraints, this set of choices is that one which makes the consumer happiest.
It is assumed that all firms are following rational decision-making, and will produce at the profit-maximizing output. Given this assumption, there are four categories in which a firm's profit may be considered.
In microeconomics, the term "market failure" does not mean that a given market has ceased functioning. Instead, a
market failure is a situation in which a given market does not efficiently organize production or
allocate goods and services to consumers. Economists normally apply the term to situations where the inefficiency is particularly
dramatic, or when it is suggested that non-market
The four main types or causes of market failure are:
Although opportunity cost can be hard to quantify, the effect of opportunity cost is universal and very real on the individual level. In fact, this principle applies to all decisions, not just economic ones. Since the work of the Austrian economist Friedrich von Wieser, opportunity cost has been seen as the foundation of the marginal theory of value.
Opportunity cost is one way to measure the cost of something. Rather than merely identifying and adding the costs of a project, one may also identify the next best alternative way to spend the same amount of money. The forgone profit of this next best alternative is the opportunity cost of the original choice. A common example is a farmer that chooses to farm his land rather than rent it to neighbors, wherein the opportunity cost is the forgone profit from renting. In this case, the farmer may expect to generate more profit himself. Similarly, the opportunity cost of attending university is the lost wages a student could have earned in the workforce, rather than the cost of tuition, books, and other requisite items (whose sum makes up the total cost of attendance). The opportunity cost of a vacation in the Bahamas might be the down payment money for a house.
Note that opportunity cost is not the sum of the available alternatives, but rather the benefit of the single, best alternative. Possible opportunity costs of the city's decision to build the hospital on its vacant land are the loss of the land for a sporting center, or the inability to use the land for a parking lot, or the money that could have been made from selling the land, or the loss of any of the various other possible uses—but not all of these in aggregate. The true opportunity cost would be the forgone profit of the most lucrative of those listed.
One question that arises here is how to assess the benefit of dissimilar alternatives. We must determine a dollar value associated with each alternative to facilitate comparison and assess opportunity cost, which may be more or less difficult depending on the things we are trying to compare. For example, many decisions involve environmental impacts whose dollar value is difficult to assess because of scientific uncertainty. Valuing a human life or the economic impact of an Arctic oil spill involves making subjective choices with ethical implications.
Applied microeconomics includes a range of specialized areas of study, many of which draw on methods from other fields. Much applied works uses little more than the basics of price theory, supply and demand. Industrial organization and regulation examines topics such as the entry and exit of firms, innovation, role of trademarks. Law and economics applies microeconomic principles to the selection and enforcement of competing legal regimes and their relative efficiencies. Labor economics examines wages, employment, and labor market dynamics. Public finance (also called public economics) examines the design of government tax and expenditure policies and economic effects of these policies (e.g., social insurance programs). Political economy examines the role of political institutions in determining policy outcomes. Health economics examines the organization of health care systems, including the role of the health care workforce and health insurance programs. Urban economics, which examines the challenges faced by cities, such as are sprawl, air and water pollution, traffic congestion, and poverty, draws on the fields of urban geography and sociology. The field of financial economics examines topics such as the structure of optimal portfolios, the rate of return to capital, econometric analysis of security returns, and corporate financial behavior. The field of economic history examines the evolution of the economy and economic institutions, using methods and techniques from the fields of economics, history, geography, sociology, psychology, and political science.
Preference - Indifference curve - Utility - Marginal utility - Income
Production theory basics - X-efficiency - Factors of production - Production possibility frontier - Production
function - Economies of scale - Economies
of scope - Profit maximization - Price
discrimination - Transfer pricing - Joint product pricing -
Welfare economics - Pareto efficiency - Kaldor-Hicks efficiency - Edgeworth box - Social welfare function - Income inequality metrics - Lorenz curve - Gini coefficient - Poverty level - Dead weight loss
Market form - Perfect competition - Monopoly - Monopolistic competition - Oligopoly - Concentration ratio - Herfindahl index
Collective action - Information asymmetry - The Market for Lemons - Externality - Public good - Competition law - Social cost - Free goods - Taxes - Tragedy of the commons - Tragedy of the anticommons.
Efficient markets theory - Financial economics - Finance - Risk
International trade - Terms of trade - Tariff - List of international trade topics
General equilibrium - Game theory - Institutional economics - Neoclassical economics - Austrian economics
| Topics in microeconomics |
|---|
| Scarcity • Opportunity cost • Supply and demand • Elasticity • Economic surplus • Economic shortage • Aggregate demand • Consumer theory • Production, costs, and pricing • Market form • Welfare economics • Market failure |
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Dansk (Danish)
n. - mikroøkonomi
Nederlands (Dutch)
micro-economie
Français (French)
n. - microéconomie
Deutsch (German)
n. - Mikroökonomie
Ελληνική (Greek)
n. pl. - (οικον.) μικροοικονομική
Italiano (Italian)
microeconomia
Português (Portuguese)
n. pl. - microeconomia (f)
Русский (Russian)
экономика в терминах отдельных участков деятельности
Español (Spanish)
n. - microeconomía
Svenska (Swedish)
n. pl. - mikroekonomi
中文(简体) (Chinese (Simplified))
个体经济学, 微观经济学
中文(繁體) (Chinese (Traditional))
n. pl. - 個體經濟學, 微觀經濟學
n. - 個體經濟學, 微觀經濟學
한국어 (Korean)
n. pl. - 미시 경제학
n. - 미시 경제
日本語 (Japanese)
n. - ミクロ経済学, 微視的経済学
العربيه (Arabic)
(الجمع) الاقتصاديات الجزئيه
עברית (Hebrew)
n. - ענף הכלכלה הדן בהיבטים מסוימים שלה, למשל היחס בין מחיר לעלות
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