Fundamentals of Business

Microeconomics

Study of the economic behaviour of individual units of an economy that is individuals, households, enterprises, or industry), is primarily concerned with the factors that affect individual economic choices, the effect of changes in these factors on the individual decision makers, how their choices are coordinated by markets, and how prices and demand are determined in individual markets.

The main subjects covered under microeconomics include theory of consumers demand, theory of the firm (supply), and demand for labour and other factors of production.
One of the goals of microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources.
Market equilibrium is a situation where the supply of an item is exactly equal to its demand.

1.1.1 Demand and Supply
Economic-forces fundamental to the price-mechanism in a free market/enterprise system. They determine the price of a good or service offered, and are in turn determined by the price obtainable. Free market enterprise arose from capitalism.

Capitalism has had certain key characteristics.

Owners of land and capital as well as the workers they employ are free to pursue their own selfinterests in seeking maximum gain from the use of their resources and labour in production.

Consumers are free to spend their incomes in ways that they believe will yield the greatest satisfaction. Basic production facilities (land and capital) are privately owned. Capital in this sense means the buildings, machines, and other equipment used to produce goods and services that are ultimately consumed.

Economic activity is organized and coordinated through the interaction of buyers and sellers (or producers) in markets.
Under capitalism system a minimum of government supervision is required; if competition is present, economic activity will be self-regulating.