Microeconomics is an important branch of Western economics. After more than 200 years of development, microeconomics has become a social science with complete system, strict logic and many branches.
Microeconomics studies the behavior of single economic subject and its interaction in market economy, explains how the market mechanism allocates resources and the necessity of government intervention in micro-economic activities.
In microeconomics, there is an important assumption: the scarcity of resources. Under this assumption, microeconomics focuses on how to make the limited resources be fully utilized, that is, the problem of resource allocation. With the optimal allocation of resources as the goal, we can derive the price theory in microeconomics: The lower the price, the less the supply and the greater the demand; Supply and demand determine prices. This is the law of prices, it’s the most important part of microeconomics.
Besides the assumption of resource scarcity, there is also the assumption of rational economic man. Or we can say: The economic decision makers are rational. From this assumption, we can get that, consumers pursue the maximization of satisfaction or utility, firms pursue the maximization of profits.
The study of microeconomics gives us a new perspective to judge our behavior. At the same time, we will also realize that the theory of microeconomics is not perfect, and needs the efforts of every economist to constantly improve.
