Principles of Microeconomics

The study of economics at the level of individual consumers, groups of consumers or firms. No very sharp boundary can be drawn between microeconomics and the other main area of the subject - macroeconomics - but its broad distinguishing feature is to focus on the choices facing, and the reasoning of, individual economic decision-makers. It is a long-standing requirement of microeconomicsthat it can justify the behaviour it ascribes to individuals as being logical, given their preferences or objectives.

The general concern of microeconomics is the efficient allocation of scarce resources between alternative uses (resource allocation) but more specifically it involves the determination of price through the optimizing behaviour of economic agents with consumers maximizing utility and firms maximizing profit. It covers both the behaviour of individual sectors and the way the sectors interact in equilibrium and disequilibrium in individual markets. The main areas of microeconomics are:demand theory (demand, theory of); the theory of the firm (firm, theory of the); the demand for labour (labour, demand for), and other factors of production; welfare economics, and the study of the interactions between markets in general equilibrium analysis.

From CREDO Microeconomics: The Penguin Dictionary of Economics.