Limitation of microeconomics


Microeconomics is most important branch of economics. It is also known by foundation for whole economic analysis. It describes about the individual behavior of society and firm. According to William Flenar,”Micro economics is related to the individual decision making units.” It tells us how price and output level of any commodity is determined? How cost of production is determined? What we mean by market and its types? How wage rate and payment for capital is defined? How the government policy affects all such activities? etc. Beside such important aspects of microeconomics, it has some imitations as given below

1)   Individual analysis

Microeconomics explains only small individual units of economic activity. This is a partial and incomplete analysis. For the national economic analysis, aggregate income and output, aggregate production and expenditure show the economic level of country. All those subjects are not considered by microeconomics. So it is regarded as the incomplete matter.

2)   Impractical assumption

Most of theories and models of microeconomics are derived based upon some assumption for examples: other things remaining same, full employment, concept of rationality etc. In real life it’s near impossible to be fulfilled those assumptions. In our daily activities, there are many variable factors along with time. Those changes in variables bring the change in individual behavior that affects microeconomic activity. Same way, it is impossible to be full employment in economy.

3)   Wrong concept of laissez faire economy

Microeconomics belief upon the concept of laissez faire economy that means there should be no interfere in market economy by government. It has been explained in market life that government should interfere for its smooth activities. An event of great depression- 1930 had made failure to the concept of laissez faire.

4)   Micro economics ignores the macro level activity

Real economic mirror of a country are employment, income, output, foreign trade, price level, impact of policy (monetary and fiscal) implementation etc. But microeconomics does not analysis all those subjects.


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