Give reasons or explain the following
Theories of microeconomics are based on certain assumptions.
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Solution
Microeconomics is based on certain assumptions. It assumes that there is full employment, laissez fair policy, pure capitalism, perfect competition, etc. However, all these assumptions neglect the dynamic and changing environment and make the microeconomic study static. Thus, we say that the assumptions are unrealistic in nature.
Concept: Importance of Micro Economics
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