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Microeconomics is a generalized analysis of consumers and firms in the market with an attempt to understand the decision-making process of firms and households. It binds its concerns within the interactions of individual buyers and sellers in the market and the factors that influence the decision-making process of these buyers and sellers. It has a focus on patterns of supply and demand and the determination of price output and individual markets.
Microeconomics is concerned with a more limited scope of the study as compared to macroeconomics. Microeconomics deals with the behavior of individuals and small firms, in an individual market, in decision-making processes and allocation of limited resources. Microeconomics examines the effects of these decisions made by the key players in the market structure on the supply and demand for goods and services, which determines prices and eventually the quantities demanded and supplied in the market. It also focuses on the effects of national economic policies such as changing taxation rates on the market structure forces of demand and supply. The theory of supply and demand assumes that the markets are perfect competition markets. This implies that the number of buyers is equal to the number of sellers in the market and that none of them has the capability to influence a change in prices in the market.
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