It is the branch of economics which is related to the smallest possible units of the economic. When we are analyzing the behavior of any particular decision making unit such as consumer, firm, an industry, entrepreneur etc, it is called micro economic. In this branch of economic, we study the individual parts of the economy. According to Left which, "Micro Economic theory or price theory deals with the behavior of initial decision making units such as consumers, resource owner, business firms as well as individuals who are too small to have an impact on the national economy".
In short, the micro approach means, it is some small part of the economy that we are analyzing.
Importance of micro economics
The importance and uses of micro economics are as below:
1. It is helpful in understanding the functions of an economic system, especially laissez faire economy.
2. It is helpful in the study of consumer behavior as a decision making unit.
3. It seeks to explain the economic efficiency involved in consumption, production and distribution.
4. It helps using determining the prices in products and factors markets.
5. It also includes the study of welfare economic.
6. The study of micro economics helps in the working of macro economic forces in the country as a whole.
7. It helps us in the formulation of economic policies to promote efficiency in production and welfare of the people.
Limitations:
There is some limitation of micro economics despite of its many advantages.
1. The micro economics studies the part of an economy and not as a whole.
2. The assumption of laissez faire economy does not exist in practical situation in the world.
3. The micro approach is not only inadequate but may lead to altogether misleading conclusions.
In short, the micro approach means, it is some small part of the economy that we are analyzing.
Importance of micro economics
The importance and uses of micro economics are as below:
1. It is helpful in understanding the functions of an economic system, especially laissez faire economy.
2. It is helpful in the study of consumer behavior as a decision making unit.
3. It seeks to explain the economic efficiency involved in consumption, production and distribution.
4. It helps using determining the prices in products and factors markets.
5. It also includes the study of welfare economic.
6. The study of micro economics helps in the working of macro economic forces in the country as a whole.
7. It helps us in the formulation of economic policies to promote efficiency in production and welfare of the people.
Limitations:
There is some limitation of micro economics despite of its many advantages.
1. The micro economics studies the part of an economy and not as a whole.
2. The assumption of laissez faire economy does not exist in practical situation in the world.
3. The micro approach is not only inadequate but may lead to altogether misleading conclusions.
