Explain the basic concepts of microeconomics.

“Micro Economics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities”.

Basic Concepts of Micro Economics: 

(i) Want: Want denotes a feeling of ‘lack of satisfaction. This feeling enables the individual to satisfy his want. 

Characteristics of wants: 

• Wants are unlimited. 
• Wants are recurring in nature. 
• Wants differ with age. 
• Wants differ with gender. 
• Wants differ due to preferences. 
• Wants differ with seasons. 
• Wants differ due to culture. 

Classification of Wants: 

Wants can be classified into.

• Economic and Non-economic want. 
• Individual Wants and Collective wants. 
• Necessities, Comforts, and Luxuries. 

(ii) Goods and Services: 

Anything that satisfies human wants is termed as a ‘good’ and has material existence while services also satisfy human wants but do not have any material existence. 

(iii) Utility: Want satisfying power of a commodity is called utility. 

(iv) Value: Value has two approaches in economics, i.e. ‘value-in-use and ‘value in exchange’. 

• Value-in-use: It refers to the worth of a commodity or it is the usefulness of a commodity. 
• Value-in-exchange: It refers to the worth of a commodity or a service expressed in terms of another commodity. 

(v) Wealth: Wealth refers to “anything which has market value and can be exchanged for money.” A commodity must possess the following characteristics to be wealthy.

• Utility 
• Scarcity 
• Transferability 
• Externality 

(vi) Personal Income: Earnings received by a person from all sources is called his personal income. 

(vii) Personal Disposable Income (PDI): It is that part of personal income which is left over after payment of direct taxes such as income tax, wealth tax, etc.