What is Microeconomics?

Microeconomics, the study of the individual economic actors, but what REALLY is it? There's alot to unpack.
by Yoaquim Boom
July 22, 2023

What is Microeconomics?

Microeconomics is the branch of economics that studies the behavior and interactions of individual economic players in markets, such as businesses and customers.

It focuses on how to allocate finite resources among multiple purposes, as well as how prices, as defined by supply and demand, provide signals to guide this allocation.

Microeconomics teaches us how businesses and people make decisions and how they adapt to changes in market conditions and government laws.

It also aids in the analysis of market structures such as monopolies and oligopolies and their effects on efficiency and customer welfare.

Microeconomic theory serves as the foundation for a wide range of public policies, including antitrust legislation, consumer protection rules, and competitiveness and market efficiency programs.

Microeconomics (Investopedia)

10 Things Microeconomics Deals With

  1. Microeconomics: Supply and demand - The relationship between the quantity of a good or service that consumers want to buy and the quantity that producers are willing to sell.

  2. Microeconomics: Market structure - The characteristics of a market, such as the number of buyers and sellers and the nature of the product, that affect the behavior of firms and consumers.

  3. Microeconomics: Elasticity - The responsiveness of the quantity demanded or supplied of a good or service to changes in price or other factors.

  4. Microeconomics: Consumer theory - The study of how consumers make purchasing decisions and how they allocate their resources.

  5. Microeconomics: Production theory - The study of how firms make production decisions, such as what goods and services to produce and at what prices.

  6. Microeconomics: Cost-benefit analysis - An approach to evaluating the potential benefits and costs of a decision or policy, used to inform decision-making.

  7. Microeconomics: Game theory - A branch of microeconomics that studies strategic decision making, where the payoffs of a decision depend on the decisions of others.

  8. Microeconomics: Market failure - Situations where the market does not allocate resources efficiently, often due to market power or externalities.

  9. Microeconomics: Public choice - The study of how individual decision-making in the political arena affects economic outcomes.

  10. Microeconomics: Behavioral economics - a field that integrate insights from psychology into economic analysis, to better understand why people make certain choices and decisions.

  11. Microeconomics: Price discrimination - Selling the same good or service at different prices to different customers based on their willingness to pay.

  12. Microeconomics: Market power - The ability of a single economic actor (or small group of actors) to significantly influence the market price.

  13. Microeconomics: Information asymmetry - Situation in which one party in a transaction has more or better information than the other party.

  14. Microeconomics: Principal-Agent problem - Situation in which one party (the principal) hires another party (the agent) to act on their behalf, but the incentives of the agent may not align with those of the principal.

Those are the basics. But the basics shape up your understanding to an large degree.