Microeconomics is the social science that studies and analyzes the different implications of individual human action, specifically on how those decisions may affect the use and distribution of scarce resources. Microeconomics shows how and why different goods have values that are not the same, how individuals make different decisions either more efficiently or more productively, and how individuals can be capable of coordinating and cooperating better among themselves. Microeconomics have come to be considered as a more complete, complex, united, advanced and established science than macroeconomics.
Microeconomics is a part of the economy that studies how houses and businesses decide how to limit their resources, products and services, either to sell or to buy some of them.
Microeconomics consists of a series of studies about the different economic trends that occur or what could happen when individuals make certain decisions or when production factors change. Individual participants are usually divided into microeconomic subgroups, such as buyers, sellers, and business owners. These people must interact with the supply and demand of resources, using money and interest rates as a pricing mechanism for proper coordination.
It studies in depth the equilibrium of the markets and the products that are within the market. If it is seen as a purely normative science, microeconomics doesn’t look for a way to explain what should happen in a market; on the contrary, it only tries to explain the things that can be expected if certain conditions change.
The main characteristics of microeconomics are as follows:
It originated in Europe in the mid-nineteenth century with a group of ideas on how to organize production by explaining the different values of goods through the psychology of the individual. The first to use the term were the marginalists, who are considered the founders of microeconomics. In the 40’s of this century, great progress was made on the subject thanks to mathematical processes. Its main exponents were Stanley Jevons, Karl Menger and León Walras who assured that there was a law in psychology that said that satisfaction for a good increased its consumption.
There are three different branches of development in microeconomics which are:
Individuals are always faced with different choices.
The main objective is to analyze the different markets that exist depending on the number of bidders and demanders in which the markets do not produce the expected results and the description of the conditions needed to have perfect competition.
The focus of microeconomics is on goods, prices, markets and different economic agents.
The main variables are consumption decisions, the demand curve, production decisions, the supply curve, the establishment of the final price of the product and the role played by management.
It is used to measure the degree of satisfaction of a person when consuming or using a good or service. It assigns numerical values to each of these goods and establishes which ones are useful.
Microeconomics enhances the ability of businesses to deliver benefits. Microeconomics works in order to analyze the different forms of marketing offered by companies and which set the prices between different goods and services.
It is important for both buyers and sellers as it forces them to make the best decisions to maximize the utility of the goods which makes everyone participate in society. Through microeconomics, we can obtain the greatest profit and the minimum loss.
An example of microeconomics is when a manufacturer increases the selling prices of cars, the microeconomics then says, that consumers will tend to buy less than before, because of the high price. Another example we can mention is when a major gold mine collapses into one of the largest exporters of the product, then the price of copper will tend to increase, because supply is restricted.