Microeconomics is the study of individual and particular economic behavior, ignoring the general economy as a whole, but focusing only on specific markets and the actions of producers and consumers.
Also known as the Price Theory, this is the part of Economic Sciences that studies the phenomenon of pricing of consumer goods and services, as well as production factors, based on the analysis of specific markets and the behavior of consumption units (individuals, families, etc.).
In order to be able to explain how the final prices of products are generated, microeconomics is based on some principles. "supply and demand" one of the main.
Based on the Principle of Rationality - every producer agent will seek to maximize their profits - it is concluded that the greater the demand for a given product, for example, the higher its price. On the other hand, if supply exceeds demand, then theoretically the value of the respective product tends to decrease.
Like individual demand it is understood the amount of a given consumer good and/or service that the consumer would be willing to consume within a certain period of time. However, it is highlighted that in this case the demand is interpreted as the "desire to consume" and not its actual realization.
To study the variations between supply and demand, microeconomics is based on three main theories:
- Consumer Theory: analyzes consumer preferences, choices, limitations in relation to values, and determines market demand for a particular product/service.
- Company / Firm Theory: studies o the economic structure of companies that aim to produce for consumers, taking into account market demand. The offer of products is now adjusted according to the number of consumers who are willing to consume the product / service.
- Production Theory: it consists of the study of the transformation of raw materials into final consumer goods for companies. It also determines the firms' costs during this process and which, consequently, will reflect on the volume of supply and price of the final product.
Learn more about meaning of economy.
Microeconomics and Macroeconomics
Macroeconomics is a branch of Economic Sciences that studies economics in a broad sense, analyzing the global economic aspects of a society or nation, disregarding the particularities of its members (individuals).
Microeconomics, on the other hand, as seen, is an area of study that addresses the opposite of macroeconomics, as it aims to analyze the particular and individual economic behavior, focusing mainly on producers and consumers within a market specific.
Learn more about meaning of macroeconomics and law of supply and demand.
