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What Is the Role of Microeconomics?

Geri Terzo
Geri Terzo

Microeconomics has a role in society as well as in the economy of a region. This field of study allows economists to determine not only the patterns of consumers, businesses, and other organizations that are spending money but also the factors that are affecting spending habits and production decisions. Microeconomics involves studying the concepts and ideas that establish supply and demand in a particular market and the way that consumers and businesses alike prioritize their spending.

Essentially, the role of microeconomics is to determine how, when combined, small economic components are affecting the broader economy. Instead of looking at market indicators that represent a wide field of data, however, this type of study considers how individuals, households, or specific markets are responding to markets. Although this economic approach does not necessarily reveal or determine economic conditions, the process offers insight into the way that consumers and businesses alike decide the value of a particular product or service. This is expressed in the amount of resources that either the consumer or business dedicates to an item.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Rather than tallying the way that consumers as a whole are responding to a particular product, for instance, microeconomics begins with the study of the extent of demand stemming from one single consumer. Once this demand has been determined, this study continues and expands to include a greater number of individuals in the assessment. Economists also study businesses to learn how these entities respond to different types of consumer demand and the ultimate effect on pricing.

A major role of microeconomics is to recognize the way that prices for goods and services are established in a given market. The process involves identifying the impact that supply and demand have on the way that items are produced. When there is a disconnect between the amount of supply and the interest stemming from buyers, there is an inefficiency in the market. The application of microeconomics should ultimately reveal where and how the market imbalance occurred.

Also, the role of microeconomics reveals the way that buyers prioritize resources. This is because even when consumers possess an interest in buying particular service or product, these individuals are typically limited in the amount of resources available to them. Subsequently, the strategies involved with microeconomics could reveal the way that consumers prioritize resources and also offer insight on the way that individual buying decisions affect market competition.

Discussion Comments


I actually think that microeconomics simplifies things. It studies how individuals act in an economy and how people manage scarce resources.

Considering that individuals make up a whole society, if we can figure out how and why individuals are acting a certain way in a market, we can make more general assumptions about the whole society and national economy. It's kind of cool.


@ddljohn-- You had to take microeconomics before macroeconomics, right? That's how it works because it's not possible to understand macroeconomics without understanding microeconomics first. How can you understand the global economy if you don't know how a market, national or local economy works? You can't.

Microeconomics is the basis of economy. Yes, some formulas and numbers are involved naturally. But these concepts and formulas form the basis of how the economy works, especially the concept of demand and supply. I'm sure you enjoy macroeconomics because the microeconomics course had already given you what you needed to know to understand it.


I had to take both a microeconomics and a macroeconomics class in college. It was part of the mandatory curriculum. I did not enjoy microeconomics at all. It was all about formulas and numbers. Macroeconomics, on the other hand, was far more exciting. We got to talk about different economic systems, the global economy, trade, etc.

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