What Are the Three Basic Questions of Microeconomics?
The three basic questions of microeconomics are: “What should I produce,” “How much should I produce,” and “Who will buy these goods or services?” These three questions are critical to successfully managing a company, thus critical to understanding microeconomics.
Microeconomics studies the behavior of individual people and companies, as opposed to macroeconomics which focuses on the economy as a whole. Microeconomics is an important subject to study for those interested in business and marketing. The three basic questions of microeconomics help entrepreneurs determine the worth of their business models. These questions address the most important factor in all business operations, which is whether the goods or services provided have the potential to be profitable.
Microeconomics is built upon the idea of the market economy. The theory of the market economy rests on the assumption that supply and demand ultimately determine the price and demand for a particular product or service. Economists who study microeconomics perform research on the ways in which consumer beliefs and demands affect a particular industry. For example, as it pertains to gasoline prices, a microeconomist would study the behavior of the consumer in order to maintain profitability for oil companies. He would consider new buying habits of the consumer or any changes in the way the consumer buys gasoline, in order to re-evaluate business practices and prices.