5. Limitation of Microeconomic
Micro economic is useful for decision making in
business as well as every element of economic
which should be studied for an individual and
aggregate economic variables. Although this
microeconomic has various importance there are
some limitation of this subject matter.

6. Static in nature
Microeconomic has assumed static equilibrium
position which indicate the constant economic
variables i.e. price quantity and demand

7. Unrealistic assumption
 Microeconomics is based on unrealistic
assumptions, especially in case of full
employment assumption which does not exist
practically. Even behavior of one individual can
not be generalized as the behavior of all.

8. Wrong Conclusion
 The conclusion drawn by microeconomics may
be applicable for individual or micro level.
Some conclusion drawn by microeconomic
may be proved wrong in the case of
macroeconomic example : saving is means of
investment for microeconomics saving
reduces saving for macro economics.

9. Analysis of individual
 Microeconomic studies only small part of the
economy. So , it is not always good to have
small knowledge which microeconomic gives.
It doesn’t give knowledge about the working of
the whole economy.

10. Ignore the roles of
government
 Microeconomic doesn’t care the roles of
government and macro policies which are very
essential for micro production activities for
example taxation the tax charge by
government must be paid by individual
producer which is added in the price of the
product.

11. No solution of problem
 Microeconomics shows the problem relating
microeconomic activities but it doesn’t provide
the solution for a raised problems relation
microeconomic.

12. Scope is the area covered by the prescribe
subject matter .So , scope of micro
economic is the area covered by this
subject matter into theories and practices of
related individual activities.
Scope of
Microeconomic

13. MICROECONOMIC THEORY
Demand
theory
Supply
theory
Wages
Interest
Profit
Rent
What to Produce
?
How to produce ?
When to Produce
?
For Whom it is to
be Produce ?

14. Comodity Pricing
 Price of individual commodities are determined
by market force of demand and supply. So
microeconomic makes demand analysis
(individual consumer behavior) and supply
analysis ( individual producer behavior.

15. Factor pricing
 Land , labor , capital and entrepreneur all
factor contribute in production process for
which they get rewards on the form of rent ,
wages , interest and profit respectively.
Microeconomics deals with determination of
such rewards i.e. factor prices. So ,
microeconomics is also known as ‘price theory’
or ‘value theory’ .

16. Welfare theory
 The subject matter of micro economics
although related to individual activities its tries
to fulfill the needs of people .In other words it
is normative i.e. hopeful for solving the
problem. It provides answer for what to
produce ? When to produce ? And how to
produce ? Also for when it is to be produced ?
In short , microeconomic guides for utilizing
scarce resource of economy to maximize
public welfare