Question

Explain why microeconomics is known as Price Theory.

Answer 1

1. Microeconomics is the study of how the prices of a person's goods and services are determined.
2. Thus, microeconomics includes theories of demand, supply, production function, and cost.
3. Microeconomics also describes how the prices of production elements such as land, labour, capital, and entrepreneurs are decided.
4. Thus, microeconomics includes theories of rent, wages, interest, and profit.

Therefore, microeconomics is known as Price Theory.