Limitations / Disadvantages of Micro economics.

1] Unrealistic assumptions
Micro economics is based on unrealistic assumptions, especially in case of full employment, laissez faire assumption which do not exist in reality. Even the behavior of an individual cannot be generalised as the behavior of all. Hence economic laws cannot be universally true.

2] Cetris paribus
It assumes that all other things remain constant [equal or same] but actually it is not so.

3] Pure capitalism
Micro economics unrealistically assumes laissez faire policy or pure capitalism. This means it assumes non-intervention of the government.It was due to this that it could not provide a proper solution for the depression of 1930’s.

4] Inadequate data
Micro economics is based on the information dealing with individual behavior. Hence it is difficult to get correct information. What is true for an individual unit may not be true in case of aggregates eg as Lord J M Keynes says, “individual saving is a virtue,but national saving may prove a calamity”. Therefore because of incorrect data, micro economics may provide inaccurate results.

5] Marginalism
Marginal means the impact of an additional unit. Micro economics uses concepts like marginal utility, marginal product, marginal revenue etc. However it is difficult to realize the principle of marginalism in real life.

6] National problem ignored
Micro economics does not deal with the national problems like business cycles inflation etc, which are important problems for the nation.

7] Help of macro economics
Micro economics has to take some help of macro economics, particularly for explaining determination of profit and rate of interest.
These limitations do not mean that the study of the micro economics is not useful, its study is very important in all fields of economics.

Posted in General Economics