What Is Micro Economics

Micro economics is a branch of economics which studies individual firms and consumers. The basis of micro economics is supply and demand; how does the market react to changes in supply and demand and inevitably how does it affect price. Microeconomic decisions by both firms and individuals are motivated by cost and benefit considerations. Costs can be either be in terms of financial costs such as average fixed costs and total variable costs or they can be in terms of opportunity costs, which consider alternatives foregone. The market mechanism in micro economics is to do with the supply and demand curve. When supply and demand meet this is the equilibrium or market clearing price; the price in which all goods should be sold at. Firms can behave different according to the structure of the market they belong in. There are different types of markets: perfect; oligopolies monopolies etc. According to the conditions of the market firms will behave differently to changes in market conditions. In Micro economics consumer preferences are key to allocation of resources. in economics resources are scarce and firms achieve efficiency by achieving the highest possible customer satisfaction with available resources. Efficiency can be productive or allocative. In addition within micro economics and indeed economics in general there are different types of statements which can be used 'Positive' Economics is where we rely on objective reasoning to work the effects of changes, such as a tax or price change. On the other hand, 'Normative' economics is based on value judgements, e.g. we should divert resources to the need of the