The use of microeconomics in business decision-making can be further elaborated as follows: (a) Optimal resource allocation It guides businessmen to determine the price of different goods and factors of production. It contributes to improved decision-making in the area of demand analysis, optimal production decisions, pricing decisions to maximize profit. The price theory in the service of business executives is known as managerial economics. Micro-economics is applied to analyses problems faced by business executives. It says which commodity is to produce, how much to produce and why to produce. Microeconomics says how resources are allocated in the production of goods and services. ![]() Microeconomics teaches to make the best use of resources. Rational behavior leads to the best use of resources. The producer surveys the possible courses of action measures the expected benefits and costs of each course of action. Micro-economics assumes that consumers and producers act rationally. Similarly, most of the government activities can be analyzed with the same concepts applied to the private sector.įor example, price determination by the post office, cost of national defense, etc are analyzed by using micro-economics. The analysis of individual industries, wages, and salary determination, individual taxes, international trade all rests on microeconomic foundations. The economy consists of the public and private sectors. The knowledge of micro-economics is indispensable to know the working of the economy. The importance of micro-economics can be analyzed on the imports macro-economics basis of the following headings: 1. Although Keynes popularized, the importance of micro-economics has not declined. Due to this, even the Neo-classical economists had concentrated on micro-economics. Micro-economics has many theoretical and practical niches. ![]() Use / Importance or Advantages of Microeconomics ![]() Advantage and Disadvantage of Microeconomics very important so in this post, we are learning about the Use, Importance, Advantage, Limitation, or Disadvantage of Microeconomics which is very useful for all economic people or general people also.
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