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Microeconomics - Essay Example

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The main aim of microeconomics is to understand the decision making process embraced by households and firms. Microeconomics has its interest on the interaction between buyers and sellers plus…
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Download file to see previous pages In addition, microeconomics looks into decisions made by businesses regarding production and prices attached to goods and services produced by individual businesses. In general, microeconomics deals with economic decisions made on a micro level (McEachern 13).
A clear understanding of microeconomics is essential since it builds a platform through which macroeconomics is constructed. Macroeconomics pays attention to a wider perspective of economic issues. Its main focus is on the national economy in general, providing a basis understanding of how issues relate to each other in the world of business. It is essential to have an understanding of microeconomics and macroeconomics in order to learn how the economy works for a given country. Decisions made by firms and individuals in microeconomics are largely influenced by costs and benefits. In this case, cost can occur in the form of financial cost or opportunity costs. Financial costs can be in the form of total variable costs or average fixed costs while opportunity costs are alternatives foregone (McEachern 14).
Microeconomics has a number of questions that economics under this branch of economy attempt to answer. Examples of such questions include impacts of changes on prices of goods on people’s purchasing decisions, impacts of increased income, and impacts of changes on interests on national savings. Economists are of the opinion that the market has two parts; the demand and supply part. The demand side consists of households, economic agents, and firms. These components of the demand side go to markets to source certain goods and services. The supply side comprises of suppliers who supply goods and services to specific markets. In this case, firms are the main suppliers (Boyes & Melvin 21).
In markets holding finished goods, those who demand mainly comprise of consumers at household levels. Contrary to this, the main consumers of capital goods include firms such as ...Download file to see next pagesRead More
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