Meaning of micro economics

The term “micro” is derived from the Greek word “Mikros” which means “small” or “a millionth part”. Micro economics studies a part of the economy not the whole. Micro economics is thus, the branch of economics which analyses the economic behavior of individual economic units such as individual consumer, individual producer, individual firm, individual industry, price of any product price of any factor or demand of an individual etc. It is through the interactions of these individual economic variables that micro economic theory explains how prices of products and factors are determined, how resources are allocated between different products and how income distribution is determined.

In other words, the determination of equilibrium output of the firm or industry, wages of a particular type of labour, the profits of an entrepreneur, the price of a particular commodity are some of the fields of micro economic theory. This is why micro economics is often called as the Price Theory or Value Theory.

Posted in General Economics