explain each term and define them (given in flow chart.)
chapter : introduction to economics
need answer in paragraph
Answers
Micro Economics:
Micro Economics deals with a small part of national economy, studying the economic actions of the individual units (like individual consumer, firm, etc.)
Scope of Micro economics
Scope of microeconomics is mainly confined to price theory and resource allocation. The scope of microeconomics can be explained as follows:
- Product Pricing:
Microeconomics explains the demand analysis, the price of various goods and services is determined by the demand and supply forces. Thus, the theory of production and cost, and theory of demand are within the scope of microeconomics.
- Factor Pricing:
In microeconomics, land, capital, labour contribute significantly to production process. Land, capital, labour, entrepreneur are determined in the form of rent, interest, wages and profit respectively. Thus, theories of rent, wages, interest and profit lie within the scope of microeconomics.
- Theory of Economic Welfare:
Theory of economics welfare also lies within the scope of micro economics. Basically, theory of economic welfare results in resource allocation i.e maximisation of satisfaction of people. It involves three efficiencies. Efficiency in production, in consumption and overall economic efficiency.
Thus, Micro economics mostly concerns with price theory and resource allocation, and is comparatively limited and narrower.