Which theory is generally included under micro economics? - Price theory - Income theory - Employment theory - None of the above

Economics Dec 12, 2020

Which theory is generally included under micro economics?

- Price theory

- Income theory

- Employment theory

- None of the above

Expert Solution

The correct answer is Price theory. Microeconomics is involved with the analysis of individual economic units while macroeconomics is involved with the analysis of the whole economy. By the entire economy, we mean the overall income and overall unemployment level.

Price theory is a micro theory because every firm sets prices which are consistent with their policy objectives; for example, a profit-making firm will establish prices to cover its cost and maximize their revenue.

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