Anyone who knows a bit about the evolution of Spanish is sure to know that the word microeconomics comes etymologically from Greek. Specifically, we can establish that said origin is in the union of two words: micro which means “small” and oikoeconomics which can be translated as “house management”.
The microeconomics is he analysis of economic activity based on individual behavior. It is a concept developed in contrast to the notion of macroeconomy, who studies the economy of a country as a unit or a totality in which multiple factors interact.
It should be noted that economics is a social science that focuses on the analysis of the processes of generation, commercialization and consumption of services and products. This discipline provides knowledge that allows managing scarce resources to satisfy the needs (which are infinite) of the persons.
Macroeconomics, based on variables such as the level of employment or national income, studies the total amount of goods and services that are produced in a certain region. This economic branch, therefore, is used as an instrument of the political management for the allocation of resources that promote development.
In the case of microeconomics, the focus of interest is on the individual agents like consumers, workers or companies. Microeconomics holds that individual decisions are taken in pursuit of the fulfillment of certain objectives. Consumers, for example, try to obtain the highest possible satisfaction with their purchases and at the lowest possible cost.
More precisely, we can establish that there are several theories that are used within microeconomics to undertake the development of its different applications and their corresponding indicators.
Among those would be, for example, the theory of the consumer thanks to which what is achieved is, starting from the individual preferences of the consumer and the goods that are offered, to anticipate the choice that he is going to make.
Another of the important pillars of microeconomics is the theory of the producer, which is based on the fact that what companies are dedicated to is to control the production task to give rise to products that are effective and that allow them to increase your own benefits.
Likewise, we cannot ignore the well-known theory of financial asset markets, which makes it clear that we currently have four market structures that are decisive in the field of economics. Specifically, these are monopoly, oligopoly, perfect competition, and monopolistic competition.
The theory of general equilibrium, that of rational choice or that of supply and demand are others that act as fundamental keys within microeconomics.
It is known as Law of supply and demand to a model that explains how prices are set in a free market. The logic of the offer indicates that the higher the price of a good, the more units will be offered. The demand, on the other hand, is higher when the price is lower. If the price of a product is too high, consumers will not be willing to pay for it and there will be a tendency for the price to fall to encourage sales. When prices are very low, on the other hand, consumers buy more and there may be a shortage of products (which is solved by a rise in prices, until reaching a new balance point).