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Know all about microeconomics in english
The “word” microeconomics has been derived from the Greek word “MIKROS” i.e Small. Microeconomics studies the small groups of individual units.In microeconomics, we discuss how various cells of economics organism such as millions of consumers, millions of firms, millions of workers etc. perform their work or you can say perform their economic activity and reach the equilibrium position.
In simple words, in microeconomics, we make a microscopic study of the economy. This is “what is microeconomics” is all about.
NATURE AND SCOPE OF MICROECONOMICS?
Nature and Scope of Microeconomics:
Nature and the scope of microeconomics are inherently contained and ordained in the definitions put forward by the economists. Macroeconomics is the study of the economic actions of individuals and well-defined groups of individuals. Prices play a major role in microeconomic theories and their goal is generally the analysis of price “what is microeconomics determination and the allocation of specific resources to particular uses.
The field covered by microeconomics is set forth below:
(a) The theory of product pricing with its two constituents: The theory of consumers’ behavior and the theory of costs and production.
(b) The theory of factor pricing with its constituents: Rent, wage, interest, and profit.
c) The theory of economic welfare: Microeconomic the analysis takes the total quantum of resources as given and seeks to explain how they are allocated to the production of various goods. It is the allocation of resources which determines what goods shall be produced and how they shall be produced. In a free market economy, allocation of resources for the production of various goods depends upon the prices of various goods or factors of production. Both the theory of product pricing and the theory of fact pricing fall within the scope of microeconomics. “They are the branches of microeconomics”.
In addition to the above, microeconomics also seeks to explain whether the allocation of resources determined is efficient. Economic efficiency involves efficiency in production, efficiency in the distribution of goods among the consumers as well as overall economic efficiency. Efficiency production involves producing the maximum possible quantity of goods out of the available amount of resources. Overall efficiency is achieved when the resources are so allocated to the production of goods that the maximum possible satisfaction of the consumers is obtained. Economic efficiency is the subject matter of theoretical welfare economics which is an important branch of microeconomic theory.
Importance of Microeconomics:
Thus, the basic issues incorporated in the domain or scope of microeconomics are the following:
(a) What goods shall be produced and in what quantities?
(b) How they shall be produced.
(c) How the goods and services produced shall be tributed.
(d) Whether the production of goods and its distribution for consumption is efficient.
Discuss briefly the subject matter of Economics
Ans:-To understand the subject matter of Economics we study different views of economists. According to classical the subject matter of Economics is the study of human behavior relating to the allocation of scarce means in alternative uses. They divided the economic activities into five parts:- consumption, production, exchange, distribution and public finance.
Explain the basic problems of choice in Economics
Ans. We know that human wants are unlimited and resources to satisfy them are limited. Further, resources have alternative uses. The scarcity of resources in relation to the multiplicity of wants are basic facts of life. Every household, producer, and economy is faced with the problem of scarcity of resources. This gives rise to the problem of making choices as to which wants to choose for immediate satisfaction and how to scarce resources. Economics deals with such problem of choices.
The main causes behind the basic problems of choice in Economics are as follows:-
(a) Unlimited human wants.
(b) Limited resources.
(c) Resources have alternative uses. The central problems of an economy are briefly discussed under the following three heads:
(a) What to produce and in what quantities: Since its resources are limited, every economy has to decide what commodities are to be produced and in what quantities.
(b) How to produce: The second basic problem that every economy has to face is that of deciding how to produce the chosen goods and services. This problem relates to the choice of the technique of production.
(c) For whom to produce: The third basic problem of allocation of resources is the problem of distribution of the produce among various individuals. In other words, who should get more or who should get less.
Write a brief note on the limitations of the microeconomic analysis?
Ans. The utility of microeconomic analysis is beyond question. It is very much useful in the domain of modern economic analysis. Even then, it has its inherent limitations These may be summarized as under:
(a) What is correct and realistic in case of individual units may not be correct in the case of aggregates The conclusions drawn in microeconomic analysis cannot be extended to the cases of aggregates.
(b) The microeconomic analysis assumes other things being equal and is based on the assumption of full employment in society. But this is the highly unrealistic assumption. In reality, there exists underemployment in society-not full employment.
(c) Microeconomics throws no light on the collective functioning of the national economy.
(d) Some important problems of economics, such public finance, monetary policy, etc. are completely beyond the purview of microeconomics.