Microeconomics is a part of economic theory that has its own subject and research methods. What does microeconomics study? The answer to this question is given below. Microeconomics studies the behavior strategies of individual economic entities in various economic conditions. An individual business entity that independently performs economic functions is the first principle of the economic system,
The main subjects of microeconomics are the buyer and the manufacturer. A buyer is a person who acts as a consumer of a product that is supplied by manufacturing enterprises. The company is a manufacturer of goods and their seller.
The subject of microeconomics research is the behavior strategies of economic entities, that is, microeconomics also studies the process of developing, making and implementing decisions about the choice and use of resources to make more profit.
Economic resources, for the most part, are limited, while the needs of society and the needs of microeconomic entities are virtually unlimited. Due to the limited resources in front of the economic entity, there is a problem of compromises that microeconomic entities must make in order to satisfy as many consumers as possible with limited resources.
Economic entities operate on the market, which can be defined as a set of entities acting with each other with the aim of exchanging goods or services. Signals that determine the behavior of microeconomic entities are changing prices, which lead to an increase or decrease in consumption or production of a product or service; as a result, demand and supply in the market are formed. Microeconomics studies the basic market models with a characteristic type of behavior of economic entities. Two groups of markets are distinguished : markets for perfect competition and markets for imperfect competition.
The first group of markets is a certain structure with a relatively small concentration of buyers and sellers, which is regulated only by market mechanisms (demand, supply, price) without any interference from state or non-state institutions.
The second group of markets includes pure monopoly, oligopoly, monopolistic competition. Microeconomics studies these groups.
In economic practice, pure monopoly and perfect competition, as ideal market structures, are not very widespread, and most often oligopoly and monopolistic competition, which belong to real market structures, are encountered.
Microeconomics methods
Microeconomics have their own research methods. These methods are a combination of general and specific research methods and techniques.
Common methods include observation, selection of facts, statistical analysis. Any study begins with observation and selection of facts. It is important to select the basic facts that reflect the process under study. To order information, statistical analysis is used to show the dynamics and development trends of the process under study. Special methods of microeconomics include microeconomic modeling - this is a simplified representation of the studied microsystem that characterizes the properties and essential aspects of the structure that is being studied. The economic model is a conditional image of economic processes, phenomena, objects. By the method of expression, the models are divided into verbal (based on the verbal description), mathematical (based on formulas), graphic, and also computer.