Micro economics in business decision

The use of micro economic in business decision can be further elaborated as follows :

1. Optimal resources allocation :Micro economics is useful in optimal allocation of resource.The resources of factors of production are always scare and limited with the business firm.Hence,they will have to make the optimal allocation of resource.Micro economics tells how the productive resources are allocated in the production of numerous goods and services.
2. Optimal production decision :The business firm can produce goods with different alternative techniques.They have to continuously face the problem of the technique to be chosen.Because,the resources like labour,capital are limited.On the contrary,their objective is to earn maximum profit.
3. Pricing policy:The firms well have to face the problem of pricing their productions.The firm should be able to fix appropriate price to achieve its objectives.Micro economics provides the basis for analyzing and solving the pricing problems.
4. Study of human behavior:Micro economics studies many firms of human behavior.The law of diminishing utility.Equi-marginal utility,indifferent curve theory all study human behavior.Economics theory can be used simple to describe the economic phenomenon.Such descriptive theory is called positive economic.As for example,when orange becomes scare,price rises,Positive theory says one causes another.
5. Examine conditions of economic welfare :The normative price theory is called welfare economics.Welfare economics studies welfare of the people as producers and consumers.It suggests possible ways of improving welfare of people.
6. Formulation of public policies:Micro economics helps government to formulation different economics policies for the welfare of the people.It gives tools and foundations for analysis of economic policy.The economic policy influence the economy.It causes changes in allocation of resources.
7. Solution of contemporary micro-economic problems:Price theory is also used in practical of economics such as public finance,international trade.It helps to analysis the effects of trade and payments.