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.
Micro-economics is also called price theory because under it with the equilibrium of the demand and supply curve individual price of different commodities is determined.
Whereas in macroeconomics, the whole economy or its large groups are studied like total production, total consumption, total investment, total savings, total demand, and total employment. Are you studying?
Microeconomics is the study of particular firms, particular households, individual wages, incomes, individual industries, and particular commodities.
Types of Microeconomics with Examples
The microeconomic deals with individual economic variables 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 in time as shown in the following diagram.
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.
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:
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).
3. Micro Dynamic Analysis
This type of microeconomic analysis explains the process of change between an initial or original equilibrium and a new equilibrium.
It also discusses the forces which have been operative during the process of change as given in the following diagram:
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.
There is microeconomics different from macroeconomics?
Scope of Microeconomics
Following are the scope and subject matter of microeconomics:
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 studied.
Under its principles of production like the law of returns to scale, cost of production, and the optimum combination of factors are studied.
Under it returns of factors of production like interest, wages, salary, and determination of profit and study.
Under different market conditions, the determination of price and output is also the main subject matter of microeconomics.
Under it, the study of particular units and the economic behavior of the group is done.
The size of an individual unit is so small that any change arises due to it having no effect on the whole economy.
Microeconomics studies only individual prices of any commodity. So, general prices are not studied under it.
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.