Microeconomics: How does it help us to understand Markets?

When we read about finance, it doesn't only talk about money.  To support the market we have to understand the working status of microeconomics.  Microeconomics is a list of theories to help us to gain an understanding of the process by which scarce resources are allocated among alternative uses. To understand the ability to predict and to control is the case in microeconomics. The concept between economists has developed the working status of economic policy design by the government. Through the development of 'Operations research ', 'management science ' and 'business economics' concepts from microeconomics have helped us to take a rational decision in business.

In the market, the key element helps the market to grow in rapid ways. i) Goods and Services or Commodities: their physical nature and attributes help us to determine the way in which they meet the needs of consumers and producers. The location at which they are made, the date which they are available. For example for commodities, the crude oil found in Dubai is different from the crude oil i.e found in Europe. It is because of the distinction between the commodities is that they cannot be regarded as perfect substitutes in production or consumption at a certain time or place.

ii) Price: The price is the biggest factor. If the customer is not ready to pay for any product another competitor will eat that gap. The price of the commodity is then the number of units debited or credited per unit of the commodity.

iii) Markets: To everyday life market is a specific place where certain types of commodities are bought and sold. The concepts of the market in economics is much more general. A market exists whenever more than two are involved in transactions.

When we talk about the market we have to clearly understand that the behaviors of the consumer's allocation of income good at a given time period. That depends on income spent on the goods consumed and the scarce resources.

If the market price of the input of the firm varies with the amount purchased then if the price rises as the firm buy larger quantities of the input the marginal opportunity cost of the input is greater than its market price to the firm.

The firm may face different prices for the input depending on whether it wishes to buy or sell.

The market may be costly to use because of information acquisition, negotiation. Then it possible for a seller to receive a net price below that paid by the buyer. Market value is created when demand is more and fulfilled by the firm. To sustain itself in the market each firm in the market equates its long-term marginal cost to the price. For each firm price must equal long-run average cost. Having the affordable price one can rule the market by owning a huge percent of the market share and become a monopoly in the market. Even a monopoly is not good for the market as it hurts the sentiments of other firms or i.e not good for developing countries. Monopoly acts as restrictions for other firms and even to contribute to GDP. The firm works on the basis of diminishing marginal in the presence of fixed price.