Question

What is the scope & subject matter of Micro Economics?

Answer 1

1. Commodity Pricing


Prices of individual commodities are determined by market forces of demand and supply. So micro economics makes demand analysis (individual consumer behaviour) and supply analysis (individual producer behaviour).


2. Factor Pricing


Land, labour, capital and entrepreneur, all factors contribute in production process. So they get rewards in the form of rent, wages, interest and profit respectively. Micro economics deals with determination of such rewards i.e. factor prices. So micro economics is also called as 'Price Theory' or 'Value Theory'.


3. Welfare Theory


Micro economics deals with optimum allocation of available resources and maximisation of social welfare. It provides answers for 'What to produce?', 'When to produce?', 'How to produce?' and 'For whom it is to be produced?'. In short, Micro economics guides for utilizing scarce resources of economy to maximize public welfare.

Answer 2

The subject matter of Micro economics mainly deals with the following theories:

• Theory of Product Pricing: This theory explains that how the relative prices of product are determined.

• Theory of Factor Pricing or Micro Theory of Distribution: The theory of factor pricing deliberates how the reward or return for the numerous factors of production should be repaid, when they are subsidizing to the production activities.

• Theory of Economic WELFARE: This theory compacts with the efficiency in the distribution of resources.

Hope it helped..........

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