Answer in details
Explain the scope and subject matter of Micro Economics.
ANSWER:
Microeconomics is the study of the following theories:
i. Theory of product pricing - The theory of product pricing explains how the prices of goods are determined in the market. For this, it is important to study demand and supply in the market. The demand is studied by studying the consumer behaviour and the supply is studied by studying the cost and production behaviour of the firm.
ii. Theory of factor pricing - The theory explains how the prices of various factors of production, namely, land, labour, capital and entrepreneur are determined in the factor market in the form of rent, wages, interest and profits, respectively.
iii. Theory of economic welfare - This theory of microeconomics deals with the allocation of resources. It explains that resources should be used in a manner that gives maximum satisfaction to people. It involves making decisions such as what to produce, how much to produce, when to produce, for whom to produce and by what technique to produce.
