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What Is Microeconomics?

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Question: What Is Microeconomics?
Answer:

What Is Microeconomics? How I Would Define It

Roughly speaking, microeconomics deals with economics decisions made at a low, or micro, level. More precisely, I would define microeconomics as "the analysis of the decisions made by individuals and groups, the factors that affect those decisions, and how those decisions effect others".

Microeconomic decisions by both firms and individuals are motivated by cost and benefit considerations. Costs can be either in terms of financial costs such as average fixed costs and total variable costs or they can be in terms of opportunity costs, which consider alternatives foregone.

Microeconomists consider questions such as "What determines how much a consumer will save?", "How much should a firm produce, given the strategies their competitors are using" and "Why do people buy both insurance and lottery tickets?"

What is Microeconomics? - How Others Define Microeconomics

Like most definitions in economics, there are various competing definitions of the term Microeconomics. Browsing the web, we will find various answers to the question:

The Economist's Dictionary of Economics defines Microeconomics as "The study of economics at the level of individual consumers, groups of consumers, or firms... The general concern of microeconomics is the efficient allocation of scarce resources between alternative uses but more specifically it involves the determination of price through the optimizing behaviour of economic agents, with consumers maximizing utility and firms maximizing profit."

Example of a Microeconomic Question

How does the change of a price of good influence a family's purchasing decisions? If my wages rise, will I be inclined to work more hours or less hours? Contrast this with Macroeconomics, which deals with questions of a large scope, such as how does a change in interest rates influence national savings?

More on Microeconomics

Economics at About.com has a number of useful resources on Microeconomics:

The Microeconomics Resource Center has articles on a great deal of microeconomics topics, such as elasticity and opportunity costs.

Microeconomics Tips and Tricks has a number of useful links for students who are looking to ace their next microeconomics test or assignment. The page Resources for Microeconomics also contains a great deal of valuable microeconomics information.

What is Microeconomics - Where to Go From Here?

Now you know what microeconomics is, it is time to expand your knowledge of economics. Here are 6 more entry-level FAQs to get you started:
  1. What is Money?
  2. What is the Business Cycle?
  3. What are Opportunity Costs?
  4. What does Economic Efficiency mean?
  5. What is the Current Account?
  6. What are Interest Rates?

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