Microeconomics

Microeconomics is a branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources. It analyzes market mechanisms, which establish relative prices among goods and services and allocates limited resources among alternative uses. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy.

History of Microeconomics

Microeconomics has its roots in the 18th century when Adam Smith wrote his famous book, The Wealth of Nations. Smith argued that the wealth of a nation is determined by the productivity of its citizens. He proposed that the best way to increase productivity was to allow individuals to pursue their own economic interests. This idea of individual economic freedom was the basis of microeconomics.

In the 19th century, the Austrian School of Economics developed the concept of marginal utility. This theory states that the value of a good or service is determined by the amount of satisfaction it provides to the consumer. This concept was further developed by Alfred Marshall in his book, Principles of Economics.

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Summary

Microeconomics is a branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources. It analyzes market mechanisms, which establish relative prices among goods and services and allocates limited resources among alternative uses. For more information about microeconomics, you can visit websites such as Investopedia, The Balance, and Khan Academy.

See Also

• Macroeconomics
• Supply and Demand
• Marginal Utility
• Alfred Marshall
• Adam Smith
• Price Elasticity
• Game Theory
• Monopoly
• Oligopoly
• Perfect Competition

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