Economics Terms A-Z

Microeconomics

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Standing in contrast to macroeconomics, microeconomics looks at the choices made by economic actors - be they people, firms, or whole industries -  and how they affect the allocation of scarce resources. Primarily, this involves investigation into why goods and services assume different values and understanding how changing economic conditions can alter the decision-making of economic actors. 

At the core of microeconomics lies the assumption - an increasingly questioned one - that individuals are rational - as in, have stable preferences - and utility maximising in their behaviour. Built on this are the economic principles: opportunity cost, diminishing marginal utility, and supply and demand, which together make up microeconomics’ skeletal epistemological form.