Glossary – Microeconomics

Definition

The study of small economic units (households, firms, specific markets, etc.), their decision-making, and their interactions in the market. 

Example

Some of he topics that are covered in microeconomics include: consumer behavior (decision making, utility maximization), profit maximization of firms, supply and demand (for individual markets), externalities, and labor markets.

Relevance

Microeconomics is one of the two major branches of economic studies. By analyzing the behavior of individuals and firms, it provides important information on economic coherences and builds the foundation for further macroeconomic studies, as it provides the data to calculate aggregate variables.