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Microeconomics - next to macroeconomics branch of economics. Microeconomics focuses on choices made by households, companies, government. Decisions made by them and their behaviors are affecting supply and demand of products and services. Microeconomics draws attention to connections and interactions between households, companies and government and how they affect each other.

Study of microeconomics

Microeconomics studies the behavior of individuals, households, and firms in making decisions about the allocation of scarce resources. It focuses on the individual level of economic activity, as opposed to the macroeconomics, which looks at the economy as a whole. The following are some of the main topics that are covered by microeconomics:

  • Consumer behavior: Microeconomics studies how individuals and households make decisions about what to buy and how much to consume. It also looks at how these decisions are influenced by factors such as income, prices, and consumer preferences.
  • Production and costs: Microeconomics examines how firms make decisions about how much to produce and what prices to charge for their products. It also studies the relationship between production costs and firms' profit-maximizing output levels.
  • Market structures: Microeconomics examines the different types of market structures, including perfect competition, monopolistic competition, oligopoly, and monopoly. It looks at how the characteristics of these different market structures influence firms' pricing and output decisions.
  • Market failure: Microeconomics examines situations where the market fails to allocate resources efficiently. This can occur due to externalities, public goods, and market power.
  • Distribution of income: Microeconomics examines how economic factors such as productivity, technological change, and government policies affect the distribution of income among individuals and households.
  • International trade: Microeconomics examines how countries interact through trade and how trade policies, tariffs and trade agreements can affect the economy.
  • Labor markets: Microeconomics examines the supply and demand of labor, wage determination, and the impact of labor market policies such as minimum wage laws, unemployment benefits, and unionization on the economy.
  • Public economics: Microeconomics examines how government policies such as taxes, subsidies, regulations, and public goods affect the economy.
  • Behavioral economics: Microeconomics examines how psychological and sociological factors can affect economic decision-making.
  • Environmental economics: Microeconomics examines how economic activities can affect the environment and how environmental policies can affect the economy.

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Author: Monika Stempień