Microeconomics: Meaning, Scope, Nature and Importance
What is Economics?
Economics is defined as the study of production, distribution, and consumption of various goods and services. It studies the decisions made by nations, governments, businesses, and individuals in the allocation of resources to achieve the best return on investment.
Importance of Economics
- It helps in coming up with a proper mechanism to counter the exhaustion of raw in times of shortage.
- Economists have a divided option on the governments level of intervention in an economy. While some economists believe that government intervention can improve access to public goods, free-market economists wish to have limited government for the same.
- One of the main duties of economists is to analyse and understand the reasons for any slump in economic growth, political issues, unemployment and poverty. This can help individuals make a better decision.
Based on the level of focus, economics can be classified into two categories: Macro-Economics and Micro-Economics
Macroeconomics: The study focuses on the behavior of an overall economy.
Microeconomics: The study concentrates on individual-level business behavior.
Macroeconomics:
- The science of macroeconomics is the study of an aggregate economy where its focus can range from the entire world, a continent, a nation, to even a particular region in a country.
- The study includes various topics such as the unemployment levels, prevailing interest rates, inflation levels, monetary policies, government regulations and Gross Domestic Product (GDP) performances, among others.
Microeconomics:
- The study of microeconomics concentrates on individual consumers and businesses behavior of taking decisions. The research focuses on distinct entities such as a government agency, a business firm, a household or a person.
- Microeconomics allows us to understand the reason for the change in price and demand of a particular product at a specific time. This is done primarily by tracking behavior at the individual level, where certain aspects of human behavior are analyzed.
- The study also includes various topics such as the efficiency and cost involved in the production of a particular good, supply and demand, allocation of labour, risk involved, uncertainty, and strategic approach at the individual consumer and business level.
- Efficiency in production: Efficiency in production means producing maximum possible amount of goods and services from the given amount of resources.
- Efficiency in consumption: Efficiency in consumption means distribution of produced goods and services among the people for consumption in such a way as to maximize total satisfaction of the society.
- Overall economic efficiency: Overall efficiency means the production of those goods which are most desired by people. Micro-economic theories show under what conditions these efficiencies are achieved. Thus, we can conclude that the scope of Micro-economics is limited to price theory (factor pricing and product pricing) and allocation of resources. It does not study the aggregates relating to the whole economy.
0 Comments