microeconomics

The division of economics concerned with the study of individual decision-making units within an economy: a consumer, firm, or industry. Unlike macroeconomics, it looks at how individual markets work and how individual producers and consumers make their choices and with what consequences.

For simplicity, microeconomics begins by analysing a market in which there is perfect competition, a theoretical state that exists only when no individual producer or consumer can influence the market price. In the real world, there is always imperfect competition for various reasons (monopoly practices, barriers to trade, and so on), and microeconomics examines what effect these have on wages and prices.

Underlying these and other concerns of microeconomics is the concept of optimality, first advanced by Vilfredo Pareto in the 19th century. Pareto's perception of the most efficient state of an economy, when there is no scope to reallocate resources without making someone worse off, has been of great influence.