What is Microeconomics?
An economy is a particular area of human production, consumption and distribution, as well as the interactions and relations of different agents involved in the process. In economic terms, it is defined ‘as an ensemble of practices, discourses, beliefs and practices that maximize the productivity of human beings through the allocation of productive assets’. Economists and other experts in the field consider an economy to be a system in which production, consumption and distribution take place in a market, with all of these processes taking place under controlled conditions. An economy is said to be a market economy when the prices of the products of production are determined by demand and supply factors, without the intervention of any central agency or force. Prices in an economy are usually determined by the circumstances prevailing at a specific time.
The basic definition of economics is that ‘the study of how people and their actions affect the process of production, consumption and distribution’. In simple economic language, the study of economics can be said to be the study of how different goods and services are produced, allocated and traded in a market economy. In a market economy, the products are produced in various markets. The distribution of these goods and services, both domestic and international, occurs in a market. There are four basic kinds of economies: the capital-constrained economy, the endogenously self-equipotent economy, the problem-solving economy and the inclusive society-based economy.
A good example of a macroeconomic term is’Gross Domestic Product’, which is a commonly used term in economics that summarizes the value of all product output. A macro-economic concept is a much broader concept that also includes the macroeconomic indicators that are needed to monitor the performance of economies. The concepts and principles of macroeconomics include macropricies, interest rates, public spending, balance of payments and structural balance.