MICRO ECONOMICS

microEconomics and macroEconomics 1.2.1 Subject-matter of Economics Before 1930, there was only one ‘economics’. Ragnar Frisch coined the words ‘micro’ and ‘macro’ in 1933 to denote the two branches of economic theory, namely, microeconomics and macroeconomics. 1.2.2 Microeconomics Meaning and Subject-matter of Microeconomics The word ‘Micro’ is derived from the Greek word mikros meaning small. Microeconomics deals with small segments of the society. Microeconomics is defined as the study of behaviour of individual decision-making units, such as consumers, resource owners and firms. It is also known as Price Theory since its major subject-matter deals with the determination of price of commodities and factors. Microeconomics has both theoretical and practical importance. It solves the three central problems of an economy, i.e., what, how and for whom to produce. Subject-matter of microeconomics is vast and includes the following topics as shown in Fig. 1.2. Fig. ...