A
major component of the definition of microeconomics is the word "individual." The
emphasis is on the singular and/or small scale. "Individual" might make someone think
of a single person, and that would fall under the category of microeconomics.
An example would be the budget that a high school students sets for themselves. That
student has various sources of income types and expenses. Managing those incomes and expenses is
microeconomics, since microeconomics deals with the financial choices that individuals make and
what factors affect and influence those choices. Those choices involve decisions about using,
distributing, and managing scarce resources; therefore, issues of supply and demand enter into
an individual's microeconomic system whether that person realizes it or not.
The category of microeconomics is also broad enough to cover individual families and
even individual businesses. As the "individual" is broadened, the microeconomic system
gets more complex and will switch over to macroeconomics once the subject is the overall economy
of a city or country.
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