What is microeconomics?
Economics is a social science that studies the production and consumption of goods and services in a country, region or on a global scale. Today, people accept that there are two areas of economics: macroeconomics and microeconomics.
The word ‘micro’ comes from the Greek word μικρό which means ‘small’. Microeconomics studies the decision-making of individuals and firms in an economy. It also studies how these individuals and firms interact with each other in an economy. In microeconomics, it is generally assumed that individuals make decisions to maximise utility (i.e. personal satisfaction) and firms make decisions to maximise profit.
What are the areas it studies?
Microeconomics can be further broken down into several main topics which microeconomists study, including:
- Competition and market structure
- Elasticity of demand
- Income distribution
- Market failures
- Markets and prices
- Supply and demand