Microeconomics

Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.^[1]^[2]^[3] Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as a whole, which is studied in macroeconomics.

Not to be confused with macroeconomics.

One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results.^[4]

While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment—and with national policies relating to these issues.^[2] Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on microeconomic behavior and thus on the aforementioned aspects of the economy.^[5] Particularly in the wake of the Lucas critique, much of modern macroeconomic theories has been built upon microfoundations—i.e., based upon basic assumptions about micro-level behavior.

(FC) – This cost does not change with output. It includes business expenses such as rent, salaries and utility bills.

Fixed cost

(VC) – This cost changes as output changes. This includes raw materials, delivery costs and production supplies.

Variable cost

Natural monopoly: A monopoly in an industry where one producer can produce output at a lower cost than many small producers.

examines the evolution of the economy and economic institutions, using methods and techniques from the fields of economics, history, geography, sociology, psychology, and political science.

Economic history

examines the organization of education provision and its implication for efficiency and equity, including the effects of education on productivity.

Education economics

examines topics such as the structure of optimal portfolios, the rate of return to capital, econometric analysis of security returns, and corporate financial behavior.

Financial economics

examines the organization of health care systems, including the role of the health care workforce and health insurance programs.

Health economics

examines topics such as the entry and exit of firms, innovation, and the role of trademarks.

Industrial organization

applies microeconomic principles to the selection and enforcement of competing legal regimes and their relative efficiencies.

Law and economics

examines the role of political institutions in determining policy outcomes.

Political economy

examines the design of government tax and expenditure policies and economic effects of these policies (e.g., social insurance programs).

Public economics

which examines the challenges faced by cities, such as sprawl, air and water pollution, traffic congestion, and poverty, draws on the fields of urban geography and sociology.

Urban economics

examines primarily labor markets, but comprises a large range of public policy issues such as immigration, minimum wages, or inequality.

Labor economics

Applied microeconomics includes a range of specialized areas of study, many of which draw on methods from other fields.

Economics

First-order approach

Macroeconomics

Critique of political economy

X-Lab: A Collaborative Micro-Economics and Social Sciences Research Laboratory

Archived 2010-10-31 at the Wayback Machine