What does Microeconomics study?

Microeconomics focuses on the study of economic behaviors and decisions made by individual entities, such as consumers, households, and firms. It analyzes how these entities interact within various markets, primarily through the lenses of supply and demand.

In microeconomics, the basic theories of supply and demand illustrate how the price of goods and services is determined in a market, as well as how individual preferences and resources influence purchasing decisions. This branch of economics is essential for understanding how individual choices affect overall market dynamics and resource allocation, which can vary significantly from larger-scale economic phenomena examined in macroeconomics.

By concentrating on specific components of the economy, microeconomics provides insights into market mechanisms, pricing structures, and the behavior of individual actors within the economy, allowing for a comprehensive understanding of economic interactions on a smaller scale. This detailed analysis is crucial for formulating policies aimed at improving market efficiency and addressing issues related to welfare and competition among consumers and businesses.