Meaning: -The term Micro Economics is derived from the Greek work “Mikros” which means “Small”. Microeconomics gives a detailed analysis of one part of the economy or society. It studies the behaviour of individual units of the economy, such as households, firms, industries and markets. Micro economics is concerned with the study of behaviour if individual element(s) of an economy, whereas, macroeconomics concerned with the study of behaviours of an economy as whole.
Definition: - Micro-economics gives a microscopic picture of the economy. The activities of numerous economic units and their inter-relationship are studied and analysed minutely through this method. Defined by (Maurice Dobb)
Features of Micro economics
1. Study of Individual Unit: - Micro economics is concerned with the study of economic behaviour of individual units like households, firms, industries and markets. In other words, it makes microscopic or in-depth study of individual economic units and no the whole economic units.
2. Microscopic approach: - Micro Economics takes a microscopic view of the economy to study how it works, i.e. it studies the function of the economy in terms of behaviour of the individual consumers, producers, firms, markets and industries. This approach is also known as slicing method, since it splits the whole economy into smaller units for the purpose of intensive study.
3. Price Theory: - Micro economics analyses how the prices of individual commodities and services are determined. It also explains how millions of producers and consumers take decision regarding allocation of resources.
4. Partial equilibrium analysis: - Micro Economics makes partial equilibrium analysis. Micro economics is based on the assumption ‘Ceteris paribus’ (which means ‘other things being constant).
5. Uses Slicing method: - Micro economics uses slicing method for in-depth study of economic units. It divides or slices the economy into smaller units, (such as individual households, individual firms, etc) for the purpose of in-depth study.
6. Vision: - Micro Economics studies in detail about the behaviour of individual economic units it examine the trees and not the entire forest.
7. Not a study of Aggregates: - Micro Economics is distinct from Macro Economics. In Macro Economics we are concerned with the economy as a whole. In micro economics we are concerned with the study of Individual units.
