Types of Microeconomics

Subject: Microeconomics

Overview

Three categories of micro-economics have been established: simple micro-statics, comparative micro-statics, and micro-dynamics. The relationship between microeconomic variables that are in equilibrium at a certain period is studied using simple micro-statics. Comparative micro-statics analyzes two equilibrium points side by side. Lagged relationships between microeconomic variables are explained by microdynamics. The process analysis demonstrates how the initial equilibrium breaks and achieves a new equilibrium. scope. Microeconomics does not deal with economic policies such as taxation, government spending, monetary, fiscal, and other such policies. Microeconomics bases its conclusions on the idea of full employment in society and makes the assumption that other things are equal. In actuality, these presumptions are false. The topics, approaches, and goals of microeconomics and macroeconomics are distinct from one another.

Simple Micro-statics:

It is the economic model that investigates various microeconomic variables and their interactions at a particular moment in time while assuming equilibrium, all other things being equal. The interaction between two market forces, supply and demand, determines the price in the market at a point in time that is also constant across time in the micro-static models of price determination.

Comparative Micro-statics:

When data have changed and the system has ultimately reached a new equilibrium position, a comparative micro-static analysis contrasts one equilibrium position with another. It does not demonstrate how a change in the data caused the system to achieve its final equilibrium position. It only describes and contrasts the initial equilibrium position with the final equilibrium position obtained after the system has been adjusted to a change in data.

Micro Dynamics 

It demonstrates how the macroeconomic variables have a lagged relationship. It fully illuminates what is occurring in the market as it moves from one static equilibrium point to another. More precisely, it investigates the mechanism through which the market's initial equilibrium is broken and a new equilibrium is established. It explains every change that took place between two equilibriums. What causes the first equilibrium to be broken or a new equilibrium to be established? are some questions it answers. What other changes take place between two equilibria? However, it does not address the following queries: Which demonstrates initial equilibrium or new equilibrium? What are their comparative differences in terms of economic factors?

Limitations of Microeconomics

  • The collective activity of the national economy cannot be concentrated through the study of microeconomics.
  • The economy policy, which includes taxation policy, government spending policy, monetary policy, fiscal policy, etc., is thought to be more significant. The entire economy is impacted by these policies. These regulations fall outside the purview of microeconomics.
  • Microeconomics bases its conclusions on the idea of full employment in society and makes the assumption that other things are equal. In actuality, these presumptions are false.
  • The 'invisible hands' or market forces are expected to fulfill their roles freely in a free enterprise system, which is the premise of microeconomic theories. Additionally, it believes that there would be no government interference in society's economic activity.
  • Microeconomics is not concerned with the behavior of the economic organism as a whole, but rather with the behavior of specific components. The economic phenomenon is only partially examined.

Reference

Koutosoyianis, A (1979), Modern Microeconomics, London Macmillan
Things to remember
  • Simple micro-statics is an economic model that examines several microeconomic variables and their relationships at a certain point in time under the assumption that everything else is equal and that there is equilibrium.
  • When data have changed and a system has ultimately reached a new equilibrium state, a comparative micro-static analysis contrasts one equilibrium position with another.
  • Lagged relationships between the macroeconomic variables are explained by microdynamics. The process analysis demonstrates how the initial equilibrium breaks and achieves a new equilibrium.
  • Microeconomics does not deal with economic policies such as taxation, government spending, monetary, fiscal, and other such policies.
  • Microeconomics bases its conclusions on the idea of full employment in society and makes the assumption that other things are equal. In actuality, these presumptions are false.

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