Microeconomics is a branch of economics that studies the behavior of individuals and small impacting players in making decisions on the allocation of limited resources and examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services. Microeconomics deals with the effects of national economic policies. It analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. Microeconomics analyzes market failure, where markets fail to produce efficient results, and describes the theoretical conditions needed for perfect competition.
Economists often use models, which are representations of what the economist wishes to analyze. If, for example, an economist wishes to analyze the behavior of a employer union, the economist will not try to include every possible aspect and piece of data about employer unions in his or her model. Important factors will be focused on, such as wages, benefits, alternative jobs, etc. Hopefully the economist's model will include all of the important variables and will give little or no weight to less critical variables.
Most economic analyses include the phrase "everything else is remaining the same", so attention can be focused on the variables specified by the model. Of course, this assumption is rarely true in real life. If one were trying to analyze federal deficits and interest rates, for example, there would be plenty of change during the time period analyzed.
Market is a place to exchange the products, services or resources. Buyers and sellers are brought together and convey their desire to buy or sell by stating their offered and asked prices for different quantities. Even if a transaction does not take place, information if translated in the pricing of the product.
An example of a market is that of the Mumbai Stock Exchange.Its purpose is to facilitate the purchase and sale of securities. The transactions are not performed by the buyers and sellers themselves, but by brokers and dealers on their behalf.Daily transaction prices are reported in many newspapers nationwide because markets also perform the important function of pricing of goods, or in this case securities.