What Are The Characteristics Of Microeconomics?

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Nathaniel Hobby Profile
Nathaniel Hobby answered
Microeconomics is an analytical branch of economics that looks at the behavior, spending patterns and allocation of money to goods and services by consumers, companies and suppliers. It looks to explain the decision making process in spending money, and what amount of money, on goods and services. This analysis can then be used by companies to try to brand, price or sell its product to consumers in a way that is more attractive. It can also tell a company what their spending tells them about themselves and how their allocation of money can be best used to turn spending into profits.

Microeconomics is vital, therefore, in establishing pricing for goods and services. For example, a micro-economical study into how much consumers are willing to spend on apples will tell companies how to price their apples to get the largest amount of profit for each apple without pricing the apple so highly that consumers are put off by the price. Microeconomics should not be restricted to monetary value either as an analysis on the spending of time or resource could also be described as economics. This is because the allocation of resources to a particular subject would say a lot about the priorities of a consumer or company.

Microeconomics is used to analyze the success or failure of specific markets as its analysis could show the reasons for spending patterns. To characterize microeconomics it would therefore be correct to state that microeconomics is, by definition, analytical as it is the analysis of spending. It could also be characterized or described as the study of behavior as it looks at the patterns and behaviors of households and companies and the process by which they make decisions.

To summarize, microeconomics can be characterized as behavioral and analytical by definition.
Florio Potter Profile
Florio Potter answered

Characteristics / Features of Microeconomics

Classical economists always insisted on micro economics because they believed that it is better to understand concept at individual level and then go for general (or macro) level. E.g. First understanding individual consumer behaviour and then analyzing the behaviour of entire market.

1  Nature of Analysis

In micro economics, the behaviour of individual consumers and producers in detail is analysed. It is study of subject matter from particular to general.

2. MethodMicro economics divides the economy into various small units and every unit is analysed in detail. It is a slicing method.3. Scope

Micro economic analysis involves product pricing, factor pricing and theory of welfare.

4. Application

Both theoretically and practically, micro economics is useful in formulating various policies, resource allocation, public finance, international trade, etc.

5. Nature of Assumptions

Assumption of Ceteris Paribus is always made in every micro economic theory. It means theory is applicable only when 'other things being same'.

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