Microeconomics/Definition

What is Microeconomics?

Microeconomics is how people deal with money, time, and resources. Microeconomics deals with the individual aspect of it while macroeconomics deals with aggregates at the level of an entire economy (e.g. total demand or total supply of goods in the national economy). Microeconomics deals with the economic interactions of a specific person, a single entity or a company. These interactions, which mainly are buying and selling goods, occur in markets. In other words Microeconomics is the study of individual market. For instance an economist may study the market for compact discs, the firms that sell compact discs and any other groups that influence the price and availability of compact discs, such as the government.

There are two main concepts that we need to understand in Microeconomics that form the basis of not only Microeconomics, but all economic theory. The concepts are supply and demand, and scarcity. With just these two concepts, we can understand almost all human economic behavior.