We will discuss the 7 Importance of Microeconomics.
Meaning:
It is the branch of economics that deals with the study of individuals, households, and firms’ behaviors in decision making and allocation of resources. Hence, it focuses on individuals and firms.
7 Importance of Microeconomics
Following are the importance / Use / Roles of Microeconomics.
1. Helpful to understand the working of the economy:
Microeconomics is very useful to study how on who economy functions. Hence, it tells us how millions of consumers and producers make decisions about the allocation of resources among goods and services. Similarly, Who to produce, how much to produce, how to produce, etc.
2. Formulation of economic policy
Microeconomic tools are useful in designing price policies, taxation policies, investment policies, etc. Similarly, it also helps to formulate sectoral policies such as tourism, trade, industry, and others.
3. Helpful in efficient allocation of resources.
Microeconomics explains how maximum social welfare can be achieved. According to microeconomics, maximum social welfare is achieved through efficiency in consumption, production, and distribution. Therefore, Maximum allocation of resources results in maximum production without waste of resources.
4. Helpful in the study of Human Behaviours
Microeconomics studies many forms of human behaviors with the help of the law of diminishing, marginal utility, equilibrium utility, indifference curve, etc.
5. Solution of Contemporary economic problems
Microeconomics is also used in practical aspects of economics such as public finance, international trade, etc. Hence, it can be used to solve contemporary problems such as issues faced by consumers, and the effects of government while formulating sectorial policies.
6. Helpful in Decision making
Microeconomics is also helpful in business decision-making. Hence, it helps business executives in making productions plan and taking decisions. Similarly, it also helps business firms to take decisions regarding their production and pricing.
7. Useful in international trade
Microeconomics is also useful and helpful to estimate the benefits of international trade. Similarly, it also helps in the determination of foreign exchange rates.
Hence, these are the 7 Importance of Microeconomics.
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