Introduction : Micro economics is the Js branch of economics that studies the behaviour of individuals. It includes individual prices, wages, income, individual industries, particular commodities, particular household, etc.
(1) Definition :
(a) According to Maurice Dobb – "Micro economics is in fact a microscopic study of l the economy.
(b) According to Prof. A. P. Lerner – "Micro economics consists of looking at the economy? through a microscope as it were to see how the millions of cell in the body of economy – the individuals or households as consumers and individuals or firms as producers play their part in the working of the whole economics organism.
(2) Meaning :
Micro economics deals with small individual economics units such as an individual (consumer, individual producer, the price of a particular commodity or factor etc.
(3) Importance :
(a) Price Determination : Micro economics j explains how the prices of different products < and various factors of production are determined.
(b) Free Market Economy : A free market economy is that economy where the economic decisions are taken at individual levels without intervention by the government. Decisions are regarding production of goods such as What to produce? How much to produce? How to produce? etc.
(c) Foreign Trade : Micro economics also explains gains from foreign trade, effects of tarrifs, factors affecting exchange rate, etc.
(d) Economic Model Building : Micro economics helps in understanding various complex economic situations with the help of economic models.
(e) Business Decision : Micro economics theories are helpful to businessman for taking important business decision related to determination of cost of production and prices of goods, maximization of output & profit, etc.
(f) Useful to Government : It is useful in formulating and evaluating economic policies including pricing and distribution policies that promote economic welfare. It is useful in determining tax policy, public, expenditure policy, etc.
(g) Basis of Welfare Economics : It explains how optimum use of resources can be made to increase the welfare of the society. It also studies how taxes affect social welfare.
