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7 Scope and Types of Microeconomics Analysis (With Examples)

Last Modified: 14 June, 2020 5 Comments

Microeconomics is the study of the economic actions of individuals and well-defined groups of individuals. The micro model is built slowly on the individuals and deals with interpersonal relations only.

scope and types of microeconomics
scope and types of microeconomics

Whereas in macroeconomics, the whole economy or its large groups are studied like total production, total consumption, total investment, total savings, total demand, total employment. Are you studied?

Microeconomics is the study of particular firms, particular households, individual wages, incomes, individual industries, and particular commodities.

Related: Macroeconomics: Definitions, Features, Scope, Importance (Step-by-Step).

Scope of Microeconomics

Following are the scope and subject matter of microeconomics:

1. Consumption

Under its principles of consumption like the law of diminishing marginal utility, the law of equal marginal utility, the law of demand, the elasticity of demand, consumer surplus, indifference curve and studied.

2. Production

Under its principles of production like the law of returns to scale, cost of production, and the optimum combination of factors are studied.

3. Distribution

Under it returns of factors of production like interest, wages, salary, and determination of profit and study.

Related: 5 Main Stages of Business Cycle with Diagram (With Examples).

4. Exchange

Under different conditions of the market, the determination of price and output is also the main subject matter of microeconomics.

Types of Microeconomics Analysis

The microeconomic analysis deals with individual economic variable and there are three types of such analysis as given below;

1. Micro Static Analysis

It is that part of the microeconomic analysis in which an equilibrium point of microeconomic variables is attained at a given point of time as shown in the following graph/Diagram.

types of microeconomics analysis
types of microeconomics analysis

The graph/diagram clearly indicates that at point E there is a microstatic point where EQ is the price and OQ is the quantity demanded and supplied.

Related: 10 Important Objectives of Demand Forecasting (With Examples).

2. Micro Comparative Static Analysis

It deals with the comparison of two micro static points of two different points in time.

The following diagram/graph shows:

types of microeconomics analysis
types of microeconomics analysis

The micro comparative static analysis where E and E1 points are comparative points under the micro static analysis showing EQ and E1Q1 prices and OQ and OQ1 quantity demanded and supplied with supply curve (SS) and original demand curve (DD) with the change in the demand curve (D1D1).

Related: 8 Main Properties of Indifference Curve with Diagram (With Examples).

3. Micro Dynamic Analysis

This type of microeconomic analysis explains the process of change between initial or original equilibrium and a new equilibrium.

It also discusses the forces which have been operative during such process of change is given in the following diagram or graph:

types of microeconomics analysis
types of microeconomics analysis

The graph or diagram shows that the initial or original equilibrium was at point E was EQ was the price and quantity demanded and supplied.

The new equilibrium is at point E1 where the new demand curve is D1D1 and the price is E1Q1 while the demand and supply are OQ1.

The change in the equilibrium from E to E1 is not a sudden change. But the process of change has been caused by several variables.

Related: 8 Major Steps of the Decision Making Process in Business (With Examples).

Features of Microeconomics

Following are the Characteristics:

1. Study of Specific Units

Under it, the study of particular units and economic behavior of the group is done.

2. No Effect on Economy

Under its size of an individual unit is so small that any change arises due to it has no effect on the whole economy.

Related: 12 Methods to Correct Disequilibrium in Balance of Payments (Step-by-Step).

3. Price Theory

Microeconomics is also called price theory because under it with the equilibrium of demand and supply curve individual price of different commodities is determined.

4. Study of Individual Price Instant of General Price Level

Microeconomics studies only individual prices of any commodity.

So, general prices are not studied under it. 15 Importance and Limitations of Microeconomics (Explained).

Conclusion

Thus, On the basis of the above points, it is clear that microeconomics is helpful in production, consumption, exchange, distribution and price determination but it is adequate for the study of unemployment, economic planning foreign trade, distribution of National income, Govt. Revenue and Banking.

Thus, now you know the scope and types of microeconomics.

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5 Comments

Reader Interactions

Comments

  1. Subham saha says

    November 14, 2018 at 2:07 PM

    Thanks .

    Reply
  2. Subham saha says

    November 14, 2018 at 2:10 PM

    Thanks

    Reply
  3. Geteconhelp says

    November 20, 2019 at 5:47 AM

    The study of economics can be classified in microeconomics and macroeconomics which are different on the grounds of objective, area to deal with or cocern with, assumption and have different limitations.

    Reply
  4. Zaid shaikh says

    November 18, 2021 at 11:22 AM

    Best guida in the webside

    Reply
    • Jennifer theron says

      November 27, 2021 at 4:24 AM

      how can i help you again

      Reply

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