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Limitations of Microeconomics – Microeconomics | Management Notes

Limitations of Microeconomics

Limitations of Microeconomics

Microeconomics is the branch of economics that deals with the study of how individual households and firms make decisions and how they interact in markets. Microeconomics studies principles, problems, and policies concerning the optimum allocation of resources with maximum satisfaction. Microeconomics plays a very important role in the study of economic theory.

Besides its importance it has certain limitations which are as follows:

  1. Wrong conclusions
  2. Static
  3. Unrealistic assumptions
  4. Limited scope
  5. Ignores the role of the government

a) Wrong conclusions

According to the viewpoint of macroeconomics, the conclusions drawn from the study of microeconomics in many cases are not valid.Microeconomics has often been proven to be misleading in many ways. Due to its focus on the individual, what is applicable to an individual may not be applicable to economies. The economic approach involves many generalizations and inferences based on certain circumstances and conditions. Often, these generalizations lead to a misunderstanding of the economic situation. As a result, wrong conclusions are drawn.

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