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What is Microeconomics?

In general terms Microeconomics is the study of the shaping of prices. This field of the economic theory, analyze the behavior of consumers, and producers such as persons, households, enterprises, governors, etc. Considering their economic choices as individual units, interacting in markets with different levels of competitiveness, and under the laws of supply and demand.

Microeconomic theory, concerns to the theoretical foundations of the distribution of total production and income among agents, considered as consumers and producers. It considers individuals both agents as suppliers of land, labour, and capital and as the ultimate consumers of the final product and services, also examines firms both as suppliers of products and services, and as consumers inputs of labour and capital.

Microeconomics seeks to analyze the market mechanisms that establish relative prices among goods and services and allocate society's resources among their many possible uses.

Scopes of Microeconomics

The field of economics is broken down into two distinct areas of study: microeconomics and macroeconomics. Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.

One important scope of microeconomics is to analyze market competitiveness mechanisms that establish relative prices amongst goods and services and allocate society's resources amongst their many alternative uses. The last concept is known as “Opportunity cost”.

Also microeconomics analyses market failures, where markets fail to maximize welfare, as well as describing the theoretical conditions needed for perfect competition.

Significant fields of study in microeconomics include :

- Theory of the firm; monopoly, oligopoly, monopsony.
- Markets under asymmetric information, and moral hazard.
- Choices taken under uncertainty.
- Economic applications of game theory, and.
- General equilibrium and society welfare.

Macroeconomics, on the other hand, looks at the big picture (hence "macro"). It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why an spot rate of unemployment is not necessarily a bad thing. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels, regarding the necessity of understand the logic of microeconomic theory to make easy deep comprehension of macroeconomic theory, and the debate between these two fundamental fields; concerning to the microeconomic foundations of macroeconomics, about the theory of aggregation, and the use of a representative and standard agent in order to be used with the forecasting models of macroeconomics.