IGCSE Economics Paper-2: Specimen Questions with Answers 86 - 86 of 100

Passage

Micro economics is often called price theory or value theory. Macroeconomics perceives the overall dimensions of the economic affairs of a country.

Question 86 (5 of 5 Based on Passage)

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Trace the scope of microeconomics.

Explanation

Microeconomics is basically concerned with market behavior and allocation of resources. It thus examines the fundamental questions related to the economic analysis.

The Importance of Microeconomics Is

  • Pricing: A major part of microeconomics theory is confined to price theory. Microeconomics takes the resources available in an economy and it explains how these resources shall be allocated to the production of goods for the satisfaction of wants.
  • Distribution: Distribution is equally important branch of microeconomics. The theory of distribution deals with the concept of factor pricing. It seeks to explain how rewards of the individual factors of production such as land, labor, capital, and enterprise are determined for their productive contribution.
  • Welfare: Welfare economics is an important branch of microeconomics as it seeks to explain how efficient the allocation of resources so determined. It helps in explaining that under what conditions the efficiency in the process of production can be achieved. The theory of economic welfare explains how an individual consumer maximizes his satisfaction when production is achieved by allocation of resources in such a way as to maximize profit.
Established Link of Economics

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