What Is Microeconomics?
Microeconomics is a social science that examines the allocation of resources to produce goods and services, and the distribution of goods and services produced.
In the modern era, this involves the study of markets and the consumers and suppliers who trade in them. Microeconomics looks at how and why different resources have different costs, and how people create more effective or more productive choices.
How Microeconomics Works
Modern microeconomics concentrates on how consumers and producers make choices to maximize their financial well being.
The income and resources available to them are a major factor in these choices. Economists collect and observe economic data from markets. They compare their assumptions, based on past data, to the actual results of the market.
Microeconomics is a broad study of markets, resources, and trade. An example might be a study of how a producer prices a product or how a household spends its monthly income.
Microeconomics vs. Macroeconomics
The Importance of Microeconomics
Think of the study of microeconomics as a peek into the “why” of the market. Microeconomics helps us to understand the market economy and how it determines prices, the use of resources, and the distribution of goods.
Microeconomic theories help inform our choices as participants in a market economy.