Microeconomics is a concept that studies the behaviour of firms and individuals when it comes to decision making and limited resources proper allocation.
On the other hand, macroeconomics studies the economic activity as a whole, such as unemployment, inflation, growth, and other related factors.
Microeconomics takes into consideration the micro foundation and micro-level behaviour of an economy in isolation.
One of the goals of microeconomics is the establishment of appropriate pricing among products or services, and the allocation of scarce resources among individuals.
Microeconomics is a spectrum of micro topics
The various topics one can go through while studying an economy from a micro perspective can be the following:
- The law of demand and supply where the prices of products or services offered and accepted, by the producers and the consumers respectively, impact the overall pricing aspect in an economy
- Measuring elasticities, where a change in the prices of the products or services has an impact on the demand and supply level of another
- The consumer demand theory that takes into consideration the consumers’ level of demand for products or services based on personal consumption, spending ability, preferences, and utility level
- The cost of production, stating that the final price of a product or service is derived from the summation of the resources used to create each product or service, such as technology, labour, capital, land, and other related contributors
- The idea of perfect competition, where the market participants apply pricing or differentiation tactics to attract and acquire a bigger market share to that of their direct competitors
- Monopoly, where a single company is the sole supplier of a product or service
- Oligopoly, the market arena dominated by a small number sellers producing and distributing products and services
Moreover, the law of demand and supply are the two key parameters that, mostly, drive the microeconomic activity.