Microeconomics studies how consumers and suppliers make economic decisions, how these decisions determine the allocation of resources and the impact public policy has on the market. It looks at the behaviour of individual firms and households and how the supply and demand for goods and services are affected by their decisions. Microeconomics also looks at how national economic policies affect the economy. It is importnat to understand how microeconomics works in order to understand macroeconomics.
In contrast to macroeconomics, which studies the economy as a whole, microeconomics looks at the interrelationships between elements of the economy, such as consumers, markets, and industries. Microeconomics analyzes the conditions that produce the most efficient level of consumption and production.
Scarcity is the main drive behind the daily choices individual consumers, producers, and suppliers make. The main goal of consumers, producers, and governments is to find a way to maximize satisfaction with the resources available. Consumer decisions are generally based on budget restraints and personal preferences.
Opportunity cost is a way to measure the cost of something, in order to determine if the something should be chosen or purchased. This is one concept that is frequently used in microeconomics.
Microeconomics helps us understand consumer and market behaviour, which is a crucial part of studying economic theory. Understanding microeconomics helps us to maximize resource utilization, build on welfare economics, and provide methods for assessing economic policies.