Microeconomics Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Microeconomics is a subdivision of the field of economics. The field has two distinct subdivisions: microeconomics and macroeconomics. Unlike macroeconomics, in which the entire economy is studied as a whole, microeconomics studies how the individual components of the overall economy (households, firms, or individuals) interact and make decisions in markets. For example, while a macroeconomist may study the relationship between the unemployment rate and the inflation rate, a microeconomist would examine the decision-making process of a firm considering whether to increase or decrease its workforce.

Typically, in microeconomics, individual entities and their effects on prices within the market are studied in relation to the more basic theories of supply and demand. Microeconomics also studies how individual firms influence and interact with each other within the larger economy. For instance, microeconomics can explain how the formation of an oligopoly (a small number of firms that dominate market share and prevent entry) affects prices and consumer utility. It can even explain why firms form clusters of similar businesses within close proximity. Microeconomic analysis relies on the assumption of a rational, utility-maximizing behavior, often aims at mathematical rigor, and is closely related to rational choice theory in the field of political science.

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