Basic Microeconomics - E-book - ePub

As most of the things in the world are scarce, the allocation ofthese scarce resources becomes very important. Economics, whether micro or macro, is needed because of this scarcity. Microeconomics deals with individuals and firms. Microeconomicscan also be termed as the study of supply and demand. Itassumes rational behavior of consumers and perfect competitionto make mathematical models. A perfectly competitive marketadjusts the prices of goods and services by itself without anyexternal intervention.
It also makes the business feasible for allthe players. Both the supply and demand are controlled by theprice. Businesses use several microeconomic concepts to makeimportant decisions like whether to expand or shrink thequantity produced, how to maximize the profit, etc. The ultimateobjective of buyers and sellers is to maximize the utility.