Identify and explain the three ways we can use microeconomic analysis.

Question

What will be an ideal response?

Answer 1

1. To understand markets and predict changes: One reason for studying microeconomics is to better understand how markets work. Once you know how markets operate, you can use economic analysis to predict how various events affect product prices and quantities. 
2. To make personal and managerial decisions: On the personal level, we use economic analysis to decide how to spend our time, what career to pursue, and how to spend and save the money we earn. As workers, we use economic analysis to decide how to produce goods and services, how much to produce, and how much to charge for them. 
3. To evaluate public policies: While societies use markets to make the most of decisions concerning production and consumption, the government has several important roles in a market-based society. We can use economic analysis to determine how well the government performs its roles in the market economy. We can also explore the trade-offs associated with various public policies.