Microeconomics Assignment And Its Importance

 

Microeconomics occupies a vital place in economics and it has both theoretical and practical importance. It is highly helpful in the formulation of economic policies that will promote the welfare of the masses. Till recently, especially before Keynesian Revolution, the body of economics consisted mainly of microeconomics; In spite of the popularity of macroeconomics these days, microeconomics retains its importance, theoretical as well as practical. It is microeconomics that tells us how a free- market economy with its millions of consumers and producers work to decide about the allocation of productive resources among the thousands of goods and services. Today we are going discuss in brief the importance of microeconomics in student’s lives. (Salvatore,2008)

Advantages Of Studying Microeconomics

• Price Determination- Micro economics helps in explaining how the prices of different commodities are determined.  It also explains how the prices of various factors of production such as rent for land, wages for labor, interest for capital and profits for entrepreneur are determined in the commodity and factor market. (Gans,2011)

·        International Trade & Public Finance- Micro economics helps to explain many international trade aspects like effects of tariff, determination of exchange rates, gains from international trade etc. It is also useful in public finance to analyze both, the incidence as well as effect of a particular tax.

·         Utilization of Resources- Micro economics helps in explaining how the scarce resources can be effectively and efficiently utilized by the producers in order to achieve maximum output.

·         Model Building: Micro economics helps in understanding various complex economic situations with its simple models. It has made a valuable contribution to the science of economics by the development of various terms, concepts, terminologies, tools of economic analysis etc.

·         Helps in Taking Business Decisions- Micro economic theories are helpful to businessmen for taking crucial business decisions. These decisions include the cost of production, prices, maximum output, consumer’s preferences, demand and supply of the product etc.

·       Useful to Government- Micro economics is that branch of economics which is concerned with the study of economic behavior of individual economic units. It is useful in framing economic policies such as taxation policy, public expenditure policy, price policy etc.  These policies help the government to attain its goal of efficient allocation of resources and promoting economic welfare of the society.

·        Working of a Free Market Economy- Free market economy is that economy where the economic decisions regarding production of goods such as ‘what to produce, How much to produce, How to produce etc.’ are taken by private individuals. These decisions are based on the preference of the consumer or demand for the product. Micro economics theory helps in understanding the working of the free market economy. 

Conclusion

Microeconomics occupies a vital place in economics and it has both theoretical and practical importance. In spite of the popularity of macroeconomics these days, microeconomics retains its importance, theoretical as well as practical. It is microeconomics that tells us how a free- market economy with its millions of consumers and producers work to decide about the allocation of productive resources among the thousands of goods and services. Micro economics helps in explaining how the prices of different commodities are determined. It helps to explain many international trade aspects like effects of tariff, determination of exchange rates, gains from international trade etc. It helps in explaining how the scarce resources can be effectively and efficiently utilized by the producers in order to achieve maximum output. It is that branch of economics which is concerned with the study of economic behavior of individual economic units.

References

Salvatore, D. (2008). Microeconomics: theory and applications. OUP Catalogue.

Frank, R. H. (2008). Microeconomics and behavior. Boston: McGraw-Hill Irwin,.

Benicourt, E., & Guerrien, B. (2008). Is anything worth keeping in microeconomics?. Review of Radical Political Economics, 40(3), 317-323.

Hosmer, L. T. (1982). The importance of strategic leadership. The Journal of Business Strategy, 3(2), 47.

Karl, E., CASE, F., OSTER, R., & Sharon, E. (2019). PRINCIPLES OF MICROECONOMICS. Pearson.

Gans, J., King, S., & Mankiw, N. G. (2011). Principles of microeconomics. Cengage Learning.

Field, A. J. (1984). Microeconomics, norms, and rationality. Economic Development and Cultural Change, 32(4), 683-711.