Microeconomics deals with individual members and group decisions of these members in an economy like household, consumer, and business. For instance, microeconomics defines how the demand curve summarizes the behaviour of buyers in the marketplace. Similarly, it defines how the supply curve summarizes the behaviour of sellers. How the supply and demand curves interact with each other and establish the equilibrium price and quantity. And how supply and demand curves shift, why demand curves slope downward. And why does the supply curve slopes upward, how to find market equilibrium, etc.
As a study branch of economics, Microeconomics is mainly concerned with decision-making by particular individual agents like firms and consumers within the larger group. From a financial perspective, microeconomics focuses on the distribution of products, goods, incomes, and services. This directly affects the financial market along with the overall value of any specific resource at any specific time. In order to understand microeconomics, in brief, it is crucial to understand two fundamental concepts of microeconomics at first- supply and demand from where comes the foundational law of demand and supply.
Supply and demand are the most examined concepts of economics. Demand determines the rate at which consumers want to buy a good, while the ability to supply a good is a determinant of the seller’s actions. Following are the main two factors of demand::
a) taste and
b) ability to pay
Taste is the desire/wish for a commodity and determines the willingness to purchase the good at a certain price. Purchasing ability means that an individual must have enough income or wealth to buy a good at a specific price.