What is modern microeconomics?
Modern microeconomics is an exploration of the purchasing behavior of individuals and independent businesses that have evolved from the economic practice of price theory, which was the basic aspect of economic theories along with monetary policy in the early 1940s. It looks at what motivates the behavior of individuals and businesses in purchasing, which directly affects supply and demand, and then these individual observations are grouped together to get a wider perspective of economic activity. However, microeconomics does not expand this analysis to include greater economic effects on national or global scale, such as the analysis of gross domestic product (GDP) data.
When modern microeconomics looks at the markets, its primary interest is what affects the buyer and seller on one per -one, because this overall behavior is what controls prices and production or productivity in markets. Because it is an approach to the economic theory of bottom value is for start -ups and individual consumptionELE who seek to access a specific market or buy goods or services for optimal value for the price. This is a place where modern microeconomics is a direct descendant of price theory, which is a wide attempt to understand the inner monetary value that a human being places on specific goods and services.
While the principles on which modern microeconomics are based may seem simple, such as calculating the characters' characters and local levels, and their scaling from a wider perspective, the actual determination of human reasoning that goes to the price determination. The Scottish pioneer of economic theory of 18 years of age century, Adam Smith, remarked this problem as early as 1776 with a paradox of diamond water. Paradox with diamond water asks confusing questions why a person Beings is placed such a small cash value on the water and so high value on diamonds when water is necessaryFor life and for an average human being, diamonds have virtually no practical value.
The theory of early prices therefore acknowledged the fact that market prices are based on two different types of awards with the summary actions of people in society. The goods are either value, such as water, or the value of the diamonds holding at a very compact and high level. The exchange value of the goods is also largely based on the amount of work required to obtain it, giving rare objects that are difficult to obtain even at intensive work of the high value of individuals. Work is the support of price theory and modern microeconomics, as it determines the relative deficiency or abundance of all limited resources and the work itself can be a limited source that is taken into account in the calculations.
After determining the specified prices for individuals and the basic causes of the levels in the price, modern microeconomics must also try to understand the strength of the market to support a specific price. Does it by looking at the availableAll in total resources and work and how effectively they are assigned to production. Therefore, the practice of modern microeconomics has microfounds to create data from the use of individual motivations, but it must also use wider facts of product prices to understand how effective and stable the market is.
One of the basic values of modern microeconomics is that it can anticipate market failure before it ever seen macroeconomics or national economic policy on the horizon. The reason is that modern microeconomics is looking for basic principles that balance the supply and demand outside the control of government forces. If efficiency is not present in production, consumption or distribution, it is a strong indicator that prices and markets are subject to rapid change.
However, some weaknesses of microeconomics include that it assumes that markets and competition are a rational environment looking for a natural balance. Price fluctuations are also based on the idea of full employment and that greater influences such as the municipalityDays of barriers, have no direct impact on the local level. Since 2011, attempts to overcome these restrictions have included the creation of increasingly complex computer models of microeconomic activities that are as close as possible to the reality of price fluctuations.