Question

Give reason or explain the following.

Microeconomics deals with allocation of resources.

Answer 1

Microeconomics is concerned with the study of economic behaviour of small individual economic units of an economy. Resources allocation means utilization of resources for the production of various goods and services. The study of microeconomics is mainly confined to resource allocation.

Microeconomics explains how relative prices of commodities and factors of production determine the allocation of resources. Allocation or resources determines what goods are to be produced, how the goods are to be produced and distributed, etc. Microeconomics also examines the efficiency in the allocation of resources and economic welfare of society.