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Microeconomics (Greek micro, ‘small’ + economics) is the study of economics at the level of the individual household or firm, in contrast to macroeconomics. Price theory has a central role in microeconomics: how prices emerge and change, and how people respond to them. This brings in issues such as competition and availability of information, both important elements in micro behaviour. The formal distinction between micro- and macroeconomics, though embodied in most textbooks, is often less than helpful. Since the early 1970s economists have renewed attempts to fuse the two, recognizing that certain key macroeconomic questions like inflation and unemployment have their roots in the way prices are fixed and labour markets operate. TF |
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