What is Micro Economics - Meaning - Significance - Limitations

The word “Micro” means a small part or a millionth part. So, Micro Economics is the study of the economy at a small level i.e., we are interested in the study of an individual unit, particular firm, industry like Cotton, textile, rice, etc. an individual customer behavior in buying and selling goods and services (its Consumption and Spending’s patterns). We study the income of particular individuals, firms, industries and not National Income. We analyze the price level of a particular products or a factor of production and not the General Price Level prevailing in the whole economy. The demand and supply of a particular product is analyzed and not the aggregate demand and aggregate supply.

Significance / Importance of Micro Economics 

1. Micro Economics has great importance for the study of economy both at theoretical and practical level. For Example, at theoretical level, we study the working and functions of an economy at an individual level. How consumers spend and save, allocate the resources for proper utilization of goods and services. From Practical point of vies, it provides solution how to implement the best option for spending and savings i.e. a customer is needed to spends 90% and saves 10% of its total income.

2. It is a Positive and Normative Science as it helps us how to operate the economy and how to control it for the welfare of the human being.

3. Various Branches of Economics such as Behavioural Economics, Environmental Economics, Public Finance, Information, International Trade, is mainly uses Micro Economics Analysis i.e. in Internal Trade Or International Economics, we deal with the imports and exports of a country with another country, in Public Finance, we deal with the public budgets, collections & payments, etc.

You Can Also Study, "What is Macro Economics"

Limitations of Micro Economics

It tells us only about the study of particular individual’s decisions units and can not provide idea about functioning of economy as a whole, for instance, if few individuals units is growing but the overall economy is declining then we can not that the economy is at Boom level, only merely due to the progression of few of the units of the whole economy.

So, Micro Economics is the study of economy at a an individual level and it is very important branch of Economics besides Macro Economics.