This paper analyzes the relevance of microeconomics and the types of market structures. Microeconomics is a branch of economics that studies the decisions of people and business firms to allocate the resources of exchange, consumption, and production. It focuses on the prices and the production in single markets and interaction between different markets. Microeconomics consists of aspects such as supply and demand and the interest rates as a mechanism for pricing. The basic concepts of microeconomic are incentives and behaviors, utility theory, production theory, and price theory.
relevance of microeconomics and types of market structures
THE RELEVANCE OF MICROECONOMICS IN BUSINESS
Microeconomics plays an important role in the study of economic theory and analyzing aspects such as market structures and the types of market structures. It helps in the understanding of how the economy works. It explains the functioning of the enterprise economy. Microeconomics also helps in the business decision making process. It guides businesses on the supply and demand analysis, cost analysis, pricing policy, optimal decision making, and optimal resource utilization. Another relevance of microeconomics in business is that it assists in the formulation of economic policies such as price policy and taxation policy. It also helps in the efficient allocation of resources as it explains the condition of efficiency in production and consumption. It assists in the formulating sectoral policies such as in tourism, trade, and industries.
relevance of microeconomics in business
THE DIFFERENT TYPES OF MARKET STRUCTURES
The in-depth study of the market structures is one of the relevance of microeconomics. It classifies market structures into four types. These are perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is a market structure where many small businesses compete against each other. They often offer similar goods and entry into the market is free. The supply and demand for goods to the market also tend to be balanced. The monopolistic competition also involves many small firms competing against each other but they sell slightly differentiated products. Both oligopoly and monopoly are types of market structures that involve domination. In an oligopoly, a small firm dominates while in monopoly a single firm controls the market.
different types of market structures
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