There are different definitions of microeconomics given by different economists and the common matter of almost all the definitions is that microeconomics refers to the study of economic behaviors of very small and individual units of an entire economy. Thus, first microeconomics divides the entire economy into several small parts and then studies each part separately and in a detailed manner. This article explains the best definition of microeconomics.
While considering several definitions of microeconomics, the definition given by the American economist Kenneth Ewart Boulding can be considered the best and most representative definition of all the other definitions of microeconomics. According to him, microeconomics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, and particular commodities.
Why is this definition considered the best?
This definition talks about all the economic activities related to a particular business firm or producer. So, it studies all the essences of how a producer is making decisions like what to produce, how to produce, how much to produce, for whom to produce, etc.
This definition also talks about how households are performing their economic activities with scarce resources. It means microeconomics studies how consumers are deciding about their choices among available alternatives, deciding about quantity to buy, how much to consume, how much to save, and so on.
Likewise, it also talks about how an individual business firm is deciding about the pricing of the production, pricing of the factors of production, and volume of profitability/income from the business.
It also studies individual industries which are collections of small firms producing homogeneous products. Different market structures like perfect competition and imperfect competition are studied in microeconomics where the concept of firms and industries are used. So, how individual industries are deciding about the level of production, exchange and distribution are studied in microeconomics.
In this way, this definition can be considered an excellent definition of microeconomics as it has succeeded in presenting the overall economic activities of the small and individual economic units within the economy.