Explain the features of Micro Economics.
The following are the features of microeconomics.
i. Individual units - Microeconomics is a study that basically focuses on the behaviour of individual units such as individual consumers and producers.
ii. Price theory - Microeconomics is also called the price theory, as it helps in determining the prices of both the commodities and factors of production in their respective markets.
iii. Slicing method - Microeconomic analysis adopts the slicing method. Under this method, the entire economy is divided into smaller units and then each unit is analyzed individually in detail.
iv. Partial equilibrium - Microeconomics uses a partial equilibrium approach. The equilibrium points are identified assuming “other things remain constant” (ceteris paribus). It ignores the interdependence of economic variables.
v. Microscopic approach - Just as a microscope enables us to see a larger view of smaller things, microeconomics shows a magnified view of an individual unit. It analyses small units in detail. It examines how these individual units perform economic activities and reach equilibrium.
vi. Marginalism principle - Marginal means change in the total due to an additional unit. The additional unit is known as the marginal unit. Microeconomics is based on the principle of marginalism as important economic decisions are based on the marginal unit.
vii. Analysis of market - Microeconomic studies deals in the study of different market structure namely, perfect competition, monopoly, monopolistic competition, oligopoly. It analyses how prices and output are determined in the market.
viii. Based on assumptions - Microeconomic analysis is based on certain assumptions such as laissez-faire, full employment, perfect competition, ceteris paribus, etc. Such assumptions although make the analysis simple, but may not exists in reality.
