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Question
Answer the following question
What is the importance of Micro Economics?
Solution
The following points highlight the importance of microeconomics:
i. It helps us in understanding how free market economies work.
ii. It explains how the prices are determined in both commodity and factor markets.
iii. It helps in making policies such as the tax policy, public expenditure policy and price policy.
iv. It helps businessmen in making decisions about prices, cost of production, investment, etc., on the basis of knowledge of the price theory.
v. It helps in examining different aspects of international trade such as the effect of tariffs on the exchange rates and gains from international trade.
vi. It helps in the development of certain models that help in understanding and solving complex economic situations.
vii. It helps in allocating resources in an efficient manner so that there is no wastage.
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