What is Microeconomics? Definition, Uses, Example


DEFINATION
Micro means small. Microeconomics deals with economic issues related to small units such as individual Consumer, producer, firm,etc. It assumes that macro variables remains constant.

The vital components of Microeconomics are as follows:
1) Theory of Consumer Behavior 
2) Theory of Producer Behavior 
3) Theory of Price

Microeconomics is concerned with determining the prices in the market. Thus it is often called as 'The Theory of Price'.
There are four factors of production namely, land, labour, capital and entrepreneurs and payment to the factors of production is called factor payments such as rent to land, wages to labour, intrest to capital and profit to entrepreneurs,  determination of these prices is known as factor pricing. 
Theory of economic welfare deals with the study of how allocation of resources effects the social welfare. 
We will discuss about the theories in detail in upcoming chapters. 

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