Microeconomics is a branch of economics that analysis the behavior of households, individuals and firms. The aim of this analysis is to determine the prices of certain goods based on demand and supply.
Microeconomics science shows that as the demand increases without an increase in supply, prices will automatically grow. Let’s take an example: in period of droughts, there are less vegetables, and people are asking for them (high demand), but there agriculture is suffering from drought and there is not enough vegetables (less supply). This will make the price of vegetable rises a lot.
Conversely, when there is high supply and less demand, prices go down. This is the case of real estate market in these days of crisis. A lot of homes are offered by owners but people have not the intention to buy. This made the prices of homes sinking down to the lowest levels.
Microeconomics explains too the theory of monopoly, cost opportunities, economies of scale and many other topics.
thank you for this article
ReplyDeletewhat about macroeconomics. i guess its the same but it deals with countries, right?