🌟Scope of Micro Economics
Scope forms the subject matter of micro economics, which indicates what we study under micro economics. The major scope of micro economics can be mentioned under the following topics:
1)theory of factor pricing: this theory is concerned with determination of price of factor input such as:land, labour, capital & organization in the form of rent, wage, interest & profit respectively.
2)theory of product pricing: This theory studies about the determination of product price under monopoly, perfect competition, cartelling etc. considering demand, supply, cost production etc.
3)Economic welfare: Under this we study about maximum satisfaction of two, major players in economy: producer & consumer i.e; maximum profit & maximum benefit.
🌟Importance of Micro Economics
Micro economy plays vital role in study of modern economic theory. Here the following points can be described as an importance of micro economics.
1)Understand the function of economy: It help us in understanding the function of free enterprise economy. It gives us an idea about how major decisions are taken in market econmy.
2)Helpful in efficient employment of resources: It suggest economizing how the available resource can have uptimum utilization in an economy.
3)helpful in International trade: It help us to explain gain from international trade, external trade, balnce of payment, disequilibrium and the determination of foreign exchange rate.
4)Helpful in understanding the consequences of taxation: Imposition of tax leads to reallocation of resources from one place to another. Micro economics explains how direct & indirect taxes leads to attainment of social welfare.
5)Tool for evaluating economic plicies: It help the government to prepare economic policies like:price policy, taxation policy etc.
6)Construction & use of models: Micro economics constructs and use general models, in order to explain & understand actual economic phenomena.
🌟Limitation of Micro-economics:
Despite it’s importance micro economics analyse suffer from certain limitations, which are as follows:
1)Generalization of individual behavior: Micro-economic theory sometimes leads to generalization of individual behavior, which may be always be true or correct.
2)”Lassiez Fare” economic system: All the economic system across the world including capitalist economy’s experience, there is governmental intervention in economic system.
3)Unrealistic assumption about full employment of resources: The assumption of the unrealistic theory is wrong with the real market. No any economic system in the world has witnessed or experienced the fuller employment of resources.
4)Economics as a whole: Micro economics is only a part of study of economy. It doesn’t help much in understanding any economic system as a whole.
5)Static assumption of “Ceteris Peribus”: The static assumption of ceteris peribus in micro economics is unrealistic in real market.