In this video, we're zooming in on a key concept that shapes all of our daily lives: Microeconomics.
What exactly is microeconomics?
Simply put, microeconomics is the branch of economics that studies individual behaviour and decision-making.
It focuses on the small-scale, the “micro” aspects of the economy.
So, when you hear microeconomics, think small!
This includes how households, individuals, and businesses make choices about what to buy, sell, and produce.
Did you know that every time you decide to buy one product over another, you're engaging in microeconomic activity?
You weigh your options, considering the cost and the benefits, and make a choice that maximises your satisfaction — or what economists call "utility."
For businesses, microeconomics helps them decide how much of a product to produce, what price to set, and how to allocate their resources efficiently.
Should they hire more workers? Invest in new technology? All these decisions fall under the scope of microeconomics.
One of the central concepts in microeconomics is the law of supply and demand.
This principle explains how the price of goods and services is determined in a market economy.
When demand for a product goes up and supply remains constant, prices tend to rise.
Conversely, if supply increases and demand remains the same, prices typically fall.
Microeconomics also explores how individuals make decisions about consumption.
For example, why do you choose a croissant over a bagel?
Economists would say you're maximising your ‘utility’ within your budget constraints — essentially getting the most value for your money.
Different market structures are also a key focus of microeconomics.
In a perfectly competitive market, many businesses sell similar products, and no single seller can influence the price.
On the other end, a monopoly exists when one company dominates the market, giving it significant power to set prices.
However, microeconomics isn't just about individuals and businesses — it's also about how government policies impact economic behaviour.
Taxes, subsidies, and regulations can all influence how resources are allocated and how markets function.
To sum it all up, microeconomics is about understanding the small details that add up to the bigger picture of how economies function.
It helps us make sense of the trade-offs we face every day, from the choices we make as consumers to the strategies businesses use to succeed.