microeconomic

Microeconomics is the branch of economics that studies how individuals, households, and firms make decisions to allocate scarce resources. It analyzes how prices, incentives, and information shape choices in markets for goods, services, labor, and capital, and how these choices interact to determine outcomes.

Demand and supply are central. The demand side represents how much buyers are willing to purchase at various prices, while the supply side reflects how much sellers are willing to offer. Prices adjust to equate quantity supplied with quantity demanded, creating market equilibrium. Elasticity measures how responsive quantity demanded or supplied is to price, income, or other factors.

Consumer theory and production theory explain how decisions are made. Consumers maximize utility subject to a budget constraint; firms minimize costs or maximize profits given technology and input prices. These decisions generate demand and supply schedules that form market outcomes.

Market structures: perfect competition, monopolistic competition, oligopoly, and monopoly describe how many sellers and the degree of product differentiation affect pricing and efficiency. Market failures and government intervention: Microeconomics also studies market failures, such as externalities, public goods, and information asymmetries, which can prevent optimal resource allocation. Policy tools include taxes, subsidies, regulation, and price controls aimed at correcting these failures or achieving distributional goals.

The field uses graphical analysis, mathematical models, and empirical methods to analyze behavior and evaluate welfare, efficiency, and policy. It provides the foundation for understanding everyday economic choices and the functioning of markets within a broader economy.