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Microeconomics: Definition, Uses, Concepts, Importance, and
Limitations
Microeconomics is the social science that investigates the consequences of incentives and decisions,
especially how they affect resource usage and distribution
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Microeconomics, in
general, gives a more thorough and deep knowledge than macroeconomics
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Individual actors
are frequently classified as belonging to microeconomic subgroups such as consumers, sellers, and
company owners
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The Uses of Microeconomics
Microeconomics can be used in either a positive or negative manner
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If a car company
raises the price of its vehicles, positive microeconomics predicts that buyers would buy fewer vehicles
than previously
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Positive microeconomics may assist an investor in understanding why Apple Inc
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A higher minimum wage might potentially require Wendy's
Company to recruit fewer workers, according to microeconomics
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This expansion of microeconomic implications from what is to what ought to be or what individuals
ought to do necessitates at least the implicit application of some type of ethical or moral theory or
principles, which typically implies some form of utilitarianism
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The Marshallian and Walrasian approaches are subsets of neoclassical microeconomics
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To develop mathematical models of economic activity, neoclassical economists use simplistic
assumptions about markets, such as perfect information, an unlimited number of buyers and sellers,
homogenous items, or static variable connections
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Neoclassicals believe in
developing quantifiable hypotheses about economic events and then testing those assumptions with
actual evidence to discover which ones perform best
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Depending on the subject being examined and the behaviors involved, microeconomics employs a
variety of research approaches
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How individuals or groups of people react to events with which they are
presented
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Consumers will pick a mix of commodities that will maximize their enjoyment or
"utility," subject to the limitation of how much money they have available to spend
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Production is the study of the process of transforming inputs into outputs
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Price Theory
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In a completely competitive market, the
price requested by consumers is the same as the price offered by producers
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Importance of Microeconomics
Following are the major importance of microeconomics:
Helpful to Study Economic Problem
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Because the entire economy is built via the combination of
individual components
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Individual savings, individual investment, and individual
spending make it simple to analyze the entire economy
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Management of Business Enterprises
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Knowledge of microeconomics is extremely useful
in decision-making
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Microeconomics is the study of the problem of the individual
economic unit, and the solution is determined through research and analysis of these difficulties
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It is possible to determine which taxes are appropriate
to apply and which are not by researching the consequences of various types of taxes using
microeconomics
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Microeconomics expertise assists managers in optimizing profit by
examining commodity cost and revenue of supply and demand
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The price of any commodity is
determined by the demand and supply of that commodity under various market conditions using
microeconomics
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Microeconomics is used to establish the price of rent, interest,
wages, salary, and other production elements such as land, capital, labor, entrepreneur, and
organization
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Microeconomics discusses the movement of
production components from households to companies, and subsequently the transfer of goods and
services from enterprises to households
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Microeconomics is useful in the development, analysis,
and evaluation of economic policy
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Microeconomics cannot provide information on the entire
economy because it only studies individual units
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Conclusions and outcomes drawn from microeconomics are
not applicable for the entire economy, for example, saving is appropriate for individuals, but if the
entire country saves it harms the economy
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Microeconomics is built on implausible assumptions such as full
employment, perfect competition, and self-interest
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Microeconomics is
insufficient for examining the consequences of government revenue
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Less Importance
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Because the importance of society and groups is growing instead of the individual

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