Economic theory generally assumes that humans will behave optimally when confronted with a specific set of circumstances which are determined by the supply of the factor of production and of the demand for the particular commodity. However, most of us are unable to think rationally in terms of such a model, as most of us cannot predict the future state of the economy in a consistent and rigorous way. Microeconomics is designed to reduce such problems, and is based on the assumption that it is not the characteristics of human beings that determine the outcome of any particular economic process, but the decisions they make, which are based on their information, preferences, values, beliefs, and emotions.
Microeconomics is usually characterized as being based on the assumption that “micro” refers to micro and that there exists no such thing as macroeconomics. It is assumed that microeconomics is independent of macroeconomics, because the decisions that individuals make in micro economics do not change the general principles of macroeconomics. In this view, microeconomics is the equivalent of classical economics and vice versa.
Microeconomics has been criticized on several counts, including the assumption that micro economies are static entities, which have no tendency to change. Critics also argue that micro economics makes inappropriate use of the term “consumption.” The concept of consumption is used in macro-economic theory in a very different context than in micro, and the effects of such use are not relevant when determining the efficiency of a system.
Micro economic activity may be influenced by factors such as government policies, the structure of industries, the functioning of monetary institutions, and the social structure of a society. It can also be affected by the behavior of firms and individuals within the organization. Microeconomic activity may be considered a natural phenomenon, as opposed to the phenomenon of economic activity and development in an economy as a whole.
Micro economic theories attempt to explain and analyze the relationship between changes in the distribution of income, changes in the distribution of the factors of production, changes in the market structure, and structure of firms, and individuals, and changes in the level of economic activity and output. In the process, they try to explain the nature of economic activity. A number of models of this nature have been developed, some of which provide a general theoretical approach and others which are more specialized.
Microeconomics is often described as follows: The economic theory of a country that is designed to make economic analysis of economic situations in terms of the interaction among the elements of that economy and their interactions. It attempts to describe how an economy grows in terms of the growth of the factors of production and the extent of the distribution of those factors.
Microeconomics was developed as a discipline within the field of economic theory. As such, its methodology relies on the empirical method and is based on the analysis of particular instances. The study of micro-economic phenomena is also closely related to the study of economic history.
Micro-economic theory is derived from a variety of different sources. The major source is the theory of the demand for a commodity or service. This theory is usually formulated as follows: There exists a market for a commodity or service. The market for a commodity or service is characterized by a certain demand for the commodity or service. The market for the commodity or service is determined by several elements such as the location of supply and demand, time, the elasticity of demand and supply, and so on.
Micro-economic theory tries to explain the relationships among the factors of production, distribution and demand. It also tries to explain how a firm can maximize its production potential by making use of its knowledge of the market structure, production processes and its location in the economy. The theory of production is also used to explain the mechanisms by which goods are produced and marketed in an economy. There are three basic elements that define production, namely raw materials, capital and labor.
The theory of microeconomics is also associated with concepts of the theory of value. It is used in the theory of value-price theory, which tries to analyze the relationship between value and price and the determination of the value of a good or service.