The term micro economics is derived from the Greek word “mikros”, meaning “small”. Micro economics deals with the analysis of small individual units such as individual consumers, individual firms and small groups of individual units. Professor Lerner says, “Micro economics consists of looking at the economy through a microscope”.
Here we study the demand of an individual consumer for a good, the behaviour of individual firms with regard to fixation of price and output. Micro economics does not study the economy in its totality.
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So micro economic theories study resource allocation, product and factor pricing, economic efficiency. Micro economics may be defined as that branch of economic analysis which studies the economic behaviour of the individual unit, may be a person, a particular household, or a particular firm. It is a study of one particular unit rather than all the units combined together.
The fields covered by micro economics are (i) theory of product pricing, (ii) theory of factor pricing and (iii) theory of economic welfare. Microeconomics is also referred to as ‘Price Theory’. Micro economics is of three types like (a) Microstatics (b) Comparative microstatics and (c) Microdynamics.