Introduction:

The word micro means millionth part. Microeconomics makes in microscopic study of every small unit of the economy in greater detail, micro economic is that branch of economics that exclusively deal with the study of the behavior and action of only individual economic units in detail. Its splits up the entire study in the small many small parts for the purpose of convenience of our study that is why it is referred to as slicing method. in microeconomics we study the income earned by one person expenditure incurred by one consumer, wages given by one firm to its workers profit earned by one firm etc. The merits and demerits of micro economics are great topic under economics.

Many economists have defined micro economics in differential ways.  Among them the following are some of the important one.

 According to MC carvel, in microeconomics we examine individual tree not the entire forest.

 Merits of microeconomics:-

• Easy understanding of economics: It helps a beginner to understand economic easily. The bit by bit approach makes the task of economic analysis simpler and easier.
• Basis for macroeconomics and welfare economics: It is the basis for macroeconomics as the study of individual units collectively makes the entire system; similarly it is the basis for welfare economic because the welfare of all individual collectively makes the social welfare
• Basis for price determination: By using the demand and supply model it helps in the determination of the prices of various goods and services in the market equilibrium price is determine at the point when demand for a product or service is equal to the supply of the product or services.
• Basis for rational location of resources: It helps in proper allocation of scarce resources between different alternative uses in the most productive manner by both consumers and producers by using the law of substitution.
• Helps to understand the working of an economy: It tells how a decentralize free market economy with it’s million of consumer and producer function without any government control
• Basis for distribution of goods and services: It tells us how the goods and services produce are distributed among various people for consumption through price mechanism
• Basis for business decision: Most of business and management decision of business executive depends on microeconomic theories principle and concepts. the concept of elasticity of demand and supply, opportunity cost, law of substitution, linear programming etc. have immensely help in estimating future demand cost profit.
• Helps to identify the condition of efficiency and welfare: It explain the condition of efficiency in consumption and production and suggest suitable policies to promote economic efficiency and welfare of people in the economy.

 Demerits of microeconomics:      

• Wrong assumption: Microeconomic analysis is based on several assumption like full employment of resources, perfect competition in the market, other things being equal etc. all this assumption are highly in unrealistic in nature and as such they have reduced the value of microeconomics.
• Existence of laissez faire policy: laissez faire principle is dead. It is replaced by direct government interference and control all over the world.
• It gives partial picture of an economy: It studies only as part of the economy hence it does not throw any light or the collective functioning of the economy.
• Narrow scope: The study of economic growth rate, trade cycle, economic planning, developing, inflation and deflation, unemployment, poverty, in equality etc. are beyond the scope of microeconomics.
• Misleading: What is true in the case of an individual unit may not be true in the case of aggregate. for example if a depositor withdraws entire amount of money nothing will happen to a bank, but when all the depositors withdraw the entire deposit simultaneously on a day surely the bank will collapse.
• Fails to offers solution to macroeconomic problems: Microeconomics theories have utterly failed to offer solution to the problem of great depression of 1930’s.

also read: what is micro economics? explain its features.