Economists study trade, production and consumption decisions, such as those that occur in a traditionalmarketplace. Main article: Microeconomics
Microeconomics, like macroeconomics, is a fundamental method for analyzing the economy as a system. It treats households and firms interacting through individual markets as irreducible elements of the economy, given scarcity and government regulation. A market might be for a product, say fresh corn, or the services of a factor of production, say bricklaying. The theory considers aggregates of quantity demanded by buyers and quantity supplied by sellers at each possible price per unit. It weaves these together to describe how the market may reach equilibrium as to price and quantity or respond to market changes over time. Such analysis includes the theory of supply and demand. It also examines market structures, such as perfect competition andmonopoly for implications as to behavior and economic efficiency. Analysis of change in a single market often proceeds from the simplifying assumption that relations in other markets remain unchanged, that is, partial-equilibrium analysis. General-equilibriumtheory allows for changes in different markets and aggregates across all markets, including their movements and interactions toward equilibrium. Production, cost, and efficiency
Main articles: Production theory basics, Opportunity cost, Economic efficiency, and Production-possibility frontier In microeconomics, production is the conversion of inputs into outputs. It is an economic process that uses inputs to create a commodity for exchange or direct use. Production is a flowand thus a rate of output per period of time. Distinctions include such production alternatives as for consumption (food, haircuts, etc.) vs. investment goods (new tractors, buildings, roads, etc.), public goods (national defense, small-pox vaccinations, etc.) or private goods (new computers, bananas, etc.), and "guns" vs. "butter". Opportunity cost refers to the economic cost of production: the value of the next best opportunity foregone....