Microeconomics Explained

Filed in Economic Basics by on November 18, 2012 2 Comments

Quick Definition

Microeconomics is the study of the actions and behaviour of individuals and firms and how they make decisions.

 

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
  • Profit
  • Supply and demand

Microeconomics.

Tags: , , , , , ,

About the Author ()

My name is Roland Mortimer and I am currently on my gap year before studying Economics and Business at University College London. I am the editor of Catch21 and ROM Economics, an economics education resource, a journalist at Shout Out UK, and an intern at Bright Blue. I also run a website development business called ROM Technology and write regularly on politics and economics.