What Are the Goals of Microeconomics?

Microeconomics is a subdivision of economics that studies how people, firms and households decide on how to allocate their limited resources in the markets. Microeconomics analyzes how the decisions made affect demand and supply for goods and services, which in turn affect market prices. One of the main goals of microeconomics is to evaluate the methods that markets use to settle on the relative prices among goods and services, and allocating scarce resources to many alternative uses.

Equity is attained when wealth and income are distributed fairly within a society. Everyone fights for equity. However, what constitutes equity is debatable. What constitutes equity to one person may be different to another. For example, one person may argue that equity is attained when everyone has equivalent income and wealth. Another will argue that equity occurs when people get income in proportion to their production. Microeconomics strives to attain equity based on these different perceptions of equality.

Efficiency is attained when people gain the maximum amount of satisfaction from the available resources. At the level of efficiency, a society cannot alter the way that resources are used to another way that will increase total satisfaction obtained. There is thus a problem of scarce resources, which is best dealt with when limited resources are used to satisfy as many needs as possible.

Growth is attained by increasing production of goods and services. Growth is indicated by measuring the growth rate in production. When an economy manufactures more goods than the previous year, then it is growing. Economic growth can also be indicated by an increase in amount of resources in terms of the land, labor, capital and entrepreneurship used to produce goods. With economic growth, people get more goods to satisfy more needs and, consequently, living standards improve.

Stability is attained by reducing variation in production, prices and employment. This goal is identified by monthly and yearly changes in such economic indicators as inflation rate, level of unemployment and production growth rate. Stability is advantageous because uncertainties in the economy are eliminated. Firms and consumers can pursue long-term production strategies and consumption respectively.