Microeconomic study historically has been performed according to general equilibrium theory, developed by Léon Walras in Elements of Pure Economics (1874) and partial equilibrium theory, introduced by Alfred Marshall in Principles of Economics (1890). Particularly in the wake of the Lucas critique, much of modern macroeconomic theories has been built upon microfoundations-i.e., based upon basic assumptions about micro-level behavior. Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on microeconomic behavior and thus on the aforementioned aspects of the economy. While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment-and with national policies relating to these issues. It also analyzes market failure, where markets fail to produce efficient results.
#MICRO AND MACRO ECONOMICS DISTINGUISH BETWEEN FREE#
Microeconomics shows conditions under which free markets lead to desirable allocations. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as whole, which is studied in macroeconomics. Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
Microeconomics analyzes the market mechanisms that enable buyers and sellers to establish relative prices among goods and services.
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