Microeconomics helps in determining the factor prices for land, labor, capital, and entrepreneurship in the form of rent, wage, interest, and profit respectively. The study of economics can be classified in microeconomics and macroeconomics which are different on the grounds of objective, area to deal with or cocern with, assumption and have different limitations. Microeconomics is useful in explaining and determining the rate of foreign exchange between currencies, fixing international trade and tariff rules, defining the cause of disequilibrium in the balance of payment (BOP), and formulating policies to minimize it. Scope of Micro Economics It uses economic theories and concepts which are used to analyze the operational and environmental problems related to a business to take appropriate business decisions and formulate future plans. It deals with the comparison of two micro static points of two different points in time. eval(ez_write_tag([[580,400],'googlesir_com-medrectangle-3','ezslot_0',105,'0','0']));Related: Macroeconomics: Definitions, Features, Scope, Importance (Step-by-Step). 4. Theory of production and costs This type of microeconomic analysis explains the process of change between initial or original equilibrium and a new equilibrium. Microeconomics is concerned with demand analysis i.e. The price of an individual commodity is determined by the market forces of demand and supply. Microeconomics is the branch of economics that deals with how individuals and organizations make decisions about allocation of scarce resources and how these individuals and organizations, interacting in markets, determine relative prices, wages, and rents. Welfare economics in microeconomics is concerned with solving the problems in improvement and attaining economic efficiency to maximize public welfare. The microeconomic analysis deals with individual economic variable and there are three types of such analysis as given below; It is that part of the microeconomic analysis in which an equilibrium point of microeconomic variables is attained at a given point of time as shown in the following graph/Diagram.eval(ez_write_tag([[300,250],'googlesir_com-box-4','ezslot_12',120,'0','0'])); The graph/diagram clearly indicates that at point E there is a microstatic point where EQ is the price and OQ is the quantity demanded and supplied. Along with this, it provides an insight on theories relating to prices of a factor of rent, wage, interest, and profit. Microeconomic analysis provides business managers with a thorough knowledge of theories of production and pricing in order to ensure optimum profit for the firm in the long run.eval(ez_write_tag([[300,250],'businesstopia_net-box-4','ezslot_7',138,'0','0'])); Microeconomics helps in analyzing market mechanisms i.e. Thus, business firms and decision makers can determine the level of demand for the commodity. Microeconomics used for the study of a business unit, but not the economy as a whole is known as managerial economics. it helps the governmental bodies to fixate on the tax rate, types of tax, and the amount of tax to be charged to buyers and sellers. The following diagram/graph shows:eval(ez_write_tag([[300,250],'googlesir_com-leader-2','ezslot_18',107,'0','0'])); The micro comparative static analysis where E and E1 points are comparative points under the micro static analysis showing EQ and E1Q1 prices and OQ and OQ1 quantity demanded and supplied with supply curve (SS) and original demand curve (DD) with the change in the demand curve (D1D1). Revenue and Banking. individual consumer behavior, and supply analysis i.e. Notify me of follow-up comments by email. Under its principles of production like the law of returns to scale, cost of production, and the optimum combination of factors are studied. It also helps in solving the producers’ dilemma of what to produce, how much to produce and for whom to produce.

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