Microeconomics is a particular focus within the broader category of economics that focuses on the impact of the consumer. The avenue of microeconomics concentrates primarily on the direct relationship between the consumer and the businessman. The decisions based upon the given information include what a customer purchases, how much they will purchase it, and how the business will alter pricing based on customer interest. Microeconomics breaks down into the following factors.
Utility: Utility looks at the customer’s basic reasons and rationale for purchasing a product. The thought is that a customer will purchase a product out of need or pleasure. If that is the basis of all purchases, then that determines a business’s course of action.
Competition: Competition refers to what other businesses or operators are functioning in the same market. For example, if you’ve ever seen two gas stations on the same street, you can see that their prices fluctuate to match each other, not just to adhere to the current market.
Opportunity: Opportunity refers to both the customer and the business. If something cost x amount of dollars, will people buy it? Overpriced is a thin line to walk.
After studying those three avenues of business, we can move onto how the products are passed on. After the cost of the product being manufactured or created is taking into context, and the gain is calculated, a company can then fluctuate their prices based on the previously mentioned factors.
We start off by categorizing where this product falls on the consumer’s hierarchy of needs and wants. Is it a need like food or hygiene products? Perhaps it’s a want like jewelry or sports equipment? After putting it into perspective, you can analyze it and put your products into practice.