Question

give reason microeconomics is known as price theory​

Answer 1

Mainstream economics is fundamentally based on this view of the world. When people make economic decisions, they are always performing some kind of analysis where they evaluate the benefit of one choice relative to another. Even if people make “irrational” consumption decisions, this just means that the cost to considering other choices is not significant enough to merit a more “rational” evaluation. Because people make decisions by comparing possible choices, they have some kind of internal metric about the relative value of those choices. Prices are the external realization of these relative valuations within a market economy such that demand equals supply. Therefore, when we consider how society could allocate resources, we want to think about the price that applies to a particular allocative decision because that price will adjust people’s relative valuations.
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