Question 1: How is the Microeconomics different from macro economics? Discuss also the subject matter of Microeconomics in detail.
Answer:
MICROECONOMICS
"Micro Economics is the study of particular firm, particular household, individual prices, wages, incomes, individual industries and particular commodities."
( K. E. Boulding)
In micro economics, we study the small segments of an economy or, in other words, we take up the individual decision – making units of an economy in microeconomics e.g., we analyze the demand of a product or often individual and the equilibrium price of a product rather than discussing the aggregate demand of the economy and the general price level in a country. Similarly in microeconomics, we study the determination of price/reward of a factor of production, analysis of an individual firm or industry, the consumption pattern of a person, choice of technique and different market situations etc. Microeconomics is generally called the “Price Theory”.
• Production. In this part of microeconomics we study the meaning of the production of wealth, the cost of production and how it is minimized factor of production and their relative importance in the production process, the production function, the analysis of supply etc.
• Exchange. This part covers the market mechanism or the exchange of wealth through the forces of demand and supply, perfect and imperfect market at the behavior of the competitors etc.
• Distribution. This part starts with the theory of distribution of rewards to the four factors of production. It explicit by bringing into account the theories of wage, rent, interest and profit.
• Consumption. This part brings into focus the behavior of a consumer, maximization of total utility by minimum expenditure, the analysis of demand of the consumer etc. The analysis of microeconomics is based on the assumptions of full