![]() Microeconomic theories assume laissez faire policy and pure capitalism in their behaviouristic models. The entire microeconomics is based on the assumption of full employment even in a short-term analysis, which is unrealistic. Unrealistic and Impractical Assumptions: Microeconomics is based on several unrealistic and impractical assumptions and hence the conclusions drawn are not correct and their desired use does not become possible.In these policies, effects on prices, effects on price of any particular commodity, wages and personal, consumption may be tested. The justification of various economic policies of the government is decided, in the contest of their effects on individual units. ![]() Helpful in Economic Policy Formulation: Microeconomics is useful in determination of economic policies.It guides in attainment of maximum productivity through optimum allocation of his given resources. It Provides a Base to Business Decision-making: For example the knowledge of price theory has its own significance in practical business decision-making and it is useful to a business in determining the price policy.For example problem of textile industry may be studied, with reference to Government polices and necessary suggestion may be given. With its help, suggestion may be given in the context of problems of any related industry, by the study of government policies. It Helps in Regional Policy Formulation: With the help of micro-economics the study of particular area or particular use is possible.Likewise, there is optimum utilization of the factors of production when their marginal products become unequal. Microeconomic law, like the law of substitution, shows how a consumer can maximize his satisfaction by equating the ratios of marginal utilities to the prices of different goods which he buys. It Teaches the Art of Economizing: microeconomic principles deal with the economizing of scarce resources and show how to use them efficiently.Similarly, a firm or an industry can take decisions decision regarding volume of production at various levels, taking production costs into consideration. A consumer may take decision in what quantity a commodity is to be purchased, at various prices. Hence, economic decisions in respect to individual units may be taken easily, with its help. Helps in Individual Decisions: Microeconomics studies the individual units. ![]() It Explains Various Aspects of International Trade: Microeconomics theories explain many aspects of international trade such as the emergence, nature and gains of international trade, determination of exchange rate, impact of tariffs on prices etc. ![]() Economics studies economics problems where as in micro-economics, small units are studied, which facilitates in understanding the economy and aggregate study of bigger problem. Hence, after study of small units, the study of the problem of the total economy becomes easier.
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