branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources

Microeconomics is the science of how people make decisions at the small scale. It is different from macroeconomics which looks at how the economy works as a whole ("on aggregate").[1] In microeconomics, we might look at how a person chooses what to buy at the store, or how many things a company will make. Some parts of microeconomics include Consumer Theory and Theory of the Firm, which study how people and businesses make decisions. Game theory looks at how people make decisions when the outcome (how something ends) depends on what decision another person makes; when agents are said to act "strategically".


  1. Krugman, Paul; Robin Wells with Margaret Ray and David Anderson (2012) Microeconomics: Second Edition in Modules Worth Publishers New York, New York page 5