Microeconomics analyzes factors affect prices and how these prices affect the number of goods or services supplied to or from a given market. Moreover, Microeconomics also examines factors affecting the demand for certain goods and services within a particular market domain.
On the other hand, macroeconomics often engulfs the sum total of all the economic activities related to economic growth, unemployment, and inflation. Notably, microeconomics often deals with economic policies that usually influence or affect a nation. Therefore, microeconomics is the aforementioned phenomenon of the economy. Some of the areas of the economy affected by microeconomics include the taxation levels of a particular country. For instance, the emergence of Lucas’s analyzes leads to the introduction of the modern macroeconomic theory that is defined upon the basic assumptions of micro-level behavior.
Among the main aims or objectives of the microeconomics is to analyze the market mechanisms that define relative prices of goods and services as well as determining the allocation of limited resources within the many alternative and competitive users and uses. Additionally, the microeconomics often analyzes the market failure especially when the market has failed to produce desirable and efficient results. In such a situation, the market analyzes deploy the use of the microeconomic phenomena to describe the theoretical conditions that are needed for perfect competitions. The most desirable areas of study in the microeconomics include the market symmetric information, general equilibrium, uncertainty principles, and applications of the economic game theory. Furthermore, microeconomics helps in analyzing product elasticity within a market system.
The supply and demand theory often assumes a market is ever perfectly competitive. This means that there are numerous sellers and buyers within a market domain but none of them has the capacity to essentially influence the prices of services or goods within that market domain.