microeconomics

Economy-And-Finanzas

2022

We explain what microeconomics is and what are the branches into which it is divided. Also, its importance and examples.

Microeconomics aspires to shape the market.

What is microeconomics?

Microeconomics is the branch of economy that contemplates the individual actions of economic agents (such as consumers, the Business, the workers and investors) and their interaction with the market. His analysis focuses on the basic economic elements: goods, services, prices, markets and economic agents.

This discipline seeks to know, understand and predict the behaviors of individual economic agents and analyzes these processes. It is based on the law of offer and the demand, which is the basic free market economy principle that explains the relationship between consumer demand for a good or service and its supply. Microeconomics aspires to model the market, which is to understand its operational dynamics and propose a structure.

Microeconomics is distinguished from macroeconomics, which is the branch of economics that studies in a global way the operation of the economy of a certain territory. Macroeconomics studies aspects such as inflation, unemployment, GDP, among others.

Elements of microeconomics

The main elements of microeconomics are:

  • Goods and services. They are those products and services that are made and offered to cover the needs of individuals and that have a certain economic value. Goods are characterized by being tangible, for example: a kilo of bread. The services are characterized by being intangible, for example: a hairdressing service.
  • Price. It is the amount or quantity that is required to acquire a certain good or service, which is regulated by the law of supply and demand. This amount is usually expressed in a monetary value.
  • Economics agents.They are those groups or individuals that participate in economic activity, such as an individual, a family, a company or the Condition.
  • Market. It is the set of processes and movements that occur in the purchase / sale of goods or services between economic agents.

Branches of microeconomics

The microeconomic approach can be divided or structured into several main branches:

  • Consumer theory. It is the branch of microeconomics that aims to understand the logic of consumption from the perspective of those who buy goods and services, that is, consumers. It raises questions such as: What choices does the consumer make when choosing a product and why? What are your preferences and your logic when it comes to consuming? How could its consumption be predicted?
  • Demand theory. It is the branch of microeconomics that studies and seeks to understand demand, that is, the desire of an individual or group to consume a specific good or service. This theory tries to approach the economy from the elements that arouse or alter the demand for a product.
  • Producer theory. It is the branch of microeconomics that looks for ways to plan and monitor production to understand and try to predict the economic flow in its entirety and seek efficient production. Some of the questions it raises are: How should a company manage its costs? How much should you produce and how can you maximize your profit?
  • General equilibrium theory. It is the branch of microeconomics that tries to explain the behavior of production, the consumption and prices in an economy with one or more markets.
  • Theory of financial asset markets. It is the branch of microeconomics that studies financial markets, which are the mechanisms for the exchange of financial assets by economic agents. This occurs whenever the purpose of consumption is not the immediate use of the good, but rather the delay in consumption over time: the increase in capital, the transfer of risks, among others.

Importance of microeconomics

Microeconomics is an important branch of economics because it studies the behavior of economic agents and some variables, such as consumption, prices and forms of production, since it serves to have information on the functioning of markets and economic agents .

Some of the factors that microeconomics studies are variations in prices, the efficient way of executing production and the way in which consumers act and decide. This allows making predictions and approximations that help to understand the functioning of the markets.

Microeconomics analyzes the interactions between different markets, which makes it possible to predict what will happen if certain variables change. This is useful to organize behaviors, decisions and preferences and to face the changes of other economic agents.

The microeconomic study is carried out from the point of view of the consumer as well as the producer and other economic agents. This makes microeconomics present in the day-to-day life of individuals, who are a fundamental actor in the economic market.

Examples of microeconomics

Some phenomena or situations that occur within the field of microeconomics are:

  • The price of a product in the supermarket.
  • The saving.
  • An online purchase.
  • The productivity of a car company.
  • A purchase paid in cash at a Commerce.
  • The service offered by a dry cleaner.
  • The annual profit of a company.
  • The investment of a company.
  • The opening of a new branch.
  • The salary of a worker.
  • The monthly expense of a family.
  • The payment in installments of a product.
  • Increased demand for bicycles in Mexico City.
  • The manufacturing and distribution process of a good.
  • The choice of a consumer versus two products.
  • The payment of the service light and gas.
  • Renting a house.
  • The increase in the price of fuel.

Macroeconomy

Macroeconomics is the branch of economics that studies the economy globally, that is, it studies the economic behavior of a given territory or country and not the interactions between economic agents that occur there. This economic branch studies variables and indices such as the global GDP, the inflation rate, the economic growth of a country, investments, crises, among others.

This part of the economy is closely linked to microeconomics, as both develop and work in tandem and influence each other. Macroeconomic indicators allow to regulate and make decisions within the microeconomic sphere, because they provide information on the global state of the economy that affects all economic decisions and transactions. Both approaches seek to improve or respond to economic issues by facilitating or providing information necessary for the decision making of market agents and players.

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