MICROECONOMICS Essay Example | Topics and Well Written Essays - 1250 words

MICROECONOMICS - Essay Example Economics, as stated is the study of both individual and the government and business behavior in terms of price, interest rates, jobs, poverty, employment, etc. As such, it has to deal with groups of people which is classified into categories namely households, business and government to facilitate the analysis of behavior. While individual behavior study is termed micro-economics, study of people at large is called macro-economics. Also, actual behavior of people falls under descriptive economics while advice or choices of economists comes under normative economics. It is evident that when policies and structures are to be studied in totality, individual responses can deliver highly variable results. As a result, economists have simplified individual responses by setting out average of a large number of responses and which behave in a similar fashion or towards a common goal. On the basis of this concept, assumptions emerge which turn into simplified models or theories of economics because they demonstrate a common and shared behavior of a large group of people. For instance, assumption of profit maximization relates to suppliers because in a particular situation, average response of a number of suppliers would be that of maximizing their profits. Likewise, assumption of satisfaction maximization applies to buyers as they tend to derive maximum satisfaction from their investments. Market in economics refers to the place where interaction between buyer and seller takes place. Level of scarcity in the production or delivery of a service determines its market value. Surplus product comes at lower price while scarce product is associated with higher price. When government intervention happens in the market due to price or supply concerns, it gets turned to public goods. Scholars of economics are continuously confronted with some difficult terms