What´s Microeconomics?

Microeconimcs is the branch of economics that studies and analyzes the market behavior of both individual firms and consumers to help understand the decision-making process of companies and households. It analyzes the relationships between both buyers and seller and at the same time studies the factors that influence the choices of both those parties. Lots of people get Macroeconimics confused with Microeconomics, and the main difference is that Macroeconomics forcuses on the bigger picture. While Macroeconimcs focuses on the national economy as a whole and the basics of the business world, Microeconomics focusses on just the opposite, this being supply and demand and how small businesses price different merchandise. The main building blocks that make-up Microeconomics include; Supply and Demand, Markets, Elasticity, Oppurtinity cost, marginal analysis, and cost-benefit analysis.

Supply and Demand is made up of two important laws, The Law of Supply and the Law of Demand. Investopedia.com defines The Law of Supply as all other things remaining equal, as the price of a good increases (decreases), the quantity of that good supplied will increase (decrease). The same site describes the Law of Demand as all other things remaining equal, as the price of a good or service increases (decreases), the quantity of that good demanded will decrease (increase). The Law of Supply and Demand can be demonstrated in a fairly simple graph. On the X-axis you have quantity of a certain item such as milk, and on the Y-axis you may have price of milk. The lower the price is for milk the higher the quantity demanded for it will be, and the higher the price of milk the lower the quantity demanded of it will be. When making a graph of this sort the suppl...

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...l to a business in order to see where the equilibrium price is and how much they can charge to maximize demand and profit. Market elasticity is a way for producers and consumers to understand the business world better, and know what times of the year a product might show more elasticity than others. Opportunity costs, Marginal analysis, and cost-benefit analysis are all key devices in deciding whether good business decisions are in facts being made, and the negatives are not out weighing the positives. Knowing how to use all of these tools is necessary for anyone who is going into the business world whether they are running a small business such as a store that sells fresh dairy products or a company that sells mountain bikes. Everything is tied together by the principles of Microeconomics and without them business’s would not be thriving as much as they are today.