Examples of microeconomics include individual households, business firms and industrial activities. Any example where an individual section of the economy makes decisions based on the allocation of limited resources are examples of microeconomics. Microeconomics is defined as the branch of economics that studies how these examples make their decisions. It is most commonly applied to markets where services or goods are being bought and sold. The study of microeconomics also looks as how these decisions, in turn, affect the supply and demand for these goods and services. It also studies the determined prices and how these prices determine the quantity supplies and the quantity demanded. Microeconomics deals with the effects of national economic policies and one of its main goals is to analyze market mechanisms that help to establish prices amongst services and goods, alongside analyzing the allocation of limited resources. Microeconomics is also used to analyze market failure, i.e. Where markets fail to produce efficient results. It can therefore describe how perfect competition can be achieved through theoretical conditions. The branch of economics can be subdivided into a number of fields of study. These include; markets under asymmetric information, choice under uncertainty, general equilibrium and economic applications of game theory.
Microeconomics considers four categories that a firm's profit could fall in to, assuming that they are following rational decision making. These four categories are economic profit, normal profit, loss minimizing conditions and shutdown. Economic profit is made when a firm's average total cost is less than the price of each addition product at the profit maximizing output. The normal profit is one that occurs when a firm's economic profit is zero. If a firm is in a loss minimizing condition it means that the price is between the average total cost and average variable cost at profit maximizing output. Lastly, a firm may go into shutdown if the price is below average variable cost at the profit maximizing output.
Often examples of microeconomics can be found by contrasting it to the study of macroeconomics. In comparison, macroeconomics considered the sum total of economic activity. This deals with the issues of inflation, unemployment and growth.
Any individual person's budget is micro economics example.