How can microeconomics help small business owners Essay

How can microeconomics help small avocation owners - Essay ExampleMicroeconomics derived from the Greek word mikros which means small, deals with a part of the economy rather than the whole. It deals with substance output, total employment, total spending but in relation to single firms and single households. Microeconomics seeks to understand the individual consumer, the buying decisions that are made at this aim and the different factors that affect the consumer expression.The subject matter of microeconomics is mainly commodity pricing, factor pricing and welfare theory. Commodity pricing entails how prices of commodities are affected by grocery forces of demand and supply. The price of commodities usually determines the demand of the products by the consumer. Factor pricing are the determination of rewards for the different factors in the production process that include land, labor, and capital. These pass the business rewards in terms of wages, rents, interest and profits. Welfare theory explains the optimum allocation of resources in order to maximize utility. It is therefore crucial for small business owners to understand more about the consumers and different factors that affect the spending behavior of consumers such as price of products, income and supplyAny business whether start-up or on-going necessarily to undertake a research of the market and actually draw up its business plan before starting operations. This gives the business its objectives and goals and provides sense of direction in the market. The following are some of the ways in which micro economics aids small business owners achieve their business goals and objectivesUnderstanding the individual behavior of the consumer. Consumer decision making is the most critical aspect of the micro economics as consumer spending makes up the highest part of the economy. Consumers after spending usually sustain surplus invest and put away for future use. Microeconomics determines how much a h ousehold save, for how long and