Microeconomics is the study of how individuals and companies make choices regarding the allocation and utilization of resources. It focuses on the behavior of individual consumers and firms, and how they make decisions about what to buy, sell, or produce. Microeconomics shows how and why different goods have different values, how individuals and businesses conduct and benefit from efficient production and exchange, and how individuals best coordinate and cooperate with one another. Some of the basic concepts of microeconomics include:

• Demand: The quantity of a good or service that consumers are willing to buy at different prices.

• Supply: The quantity of a good or service that producers are willing to produce and sell at different prices.

• Market equilibrium: The point where the quantity of a good or service demanded by consumers is equal to the quantity supplied by producers.

• Opportunity cost: The cost of choosing one option over another, measured in terms of the benefits foregone from the next best alternative.

• Production theory: Explains how businesses decide on the quantity of raw material to be used and the quantity of items to be produced and sold.

Microeconomics deals with prices and production in single markets and the interaction between different markets but leaves the study of economy-wide aggregates to macroeconomics. Microeconomists formulate various types of models based on logic and observed human behavior and test the models against real-world observations.