Concept of Microeconomics


Orientation to the subject matter tells us that:

Microeconomics is the study of economic problems (or economic issues) at the level of an individual ? individual consumer (also called household) or individual producer owning a firm or an industry.

As a consumer/household, your means (or resources) are scarce in relation to your wants. The problem is to allocate your limited resources to the purchase of alternative goods in a manner that gives you maximum satisfaction.

As a producer again, your resources are scarce in relation to goods you would like to produce. Accordingly the problem: the problem of allocation of limited resources to the production of alternative goods, in a manner that generates maximum profits.

Resource allocation is the central issue in microeconomics, whether we are studying it from the viewpoint of a consumer or a producer. However, generally, when we talk of resource allocation we refer to it from the viewpoint of producers. Thus, resource allocation by the producers is taken as the centrestage of microeconomics.

Resource Allocation by the producers is taken as the centrestage of microeconomics. Studying microeconomics means studying the problem of resource allocation by the producers in an economy.
Economy: It refers to a system by which people of an area (or a country) earn their living. If most people of a country earn their living largely by allocating their resources to the production of agricultural goods, economy of that country would be called ?agricultural economy?. Likewise, a country may have an industrial economy if people of that country earn their living largely by allocating their resources to the production of industrial goods.