Microeconomics Essay Example | Topics and Well Written Essays - 1000 words - 6

Microeconomics - Essay Example The ecological paradigm emphasises on the health and survival of ecosystems. This means minimal and controlled exploitation of the ecosystem. On the other hand, microeconomics stresses on maximising the welfare of the people. This involves maximum exploitation of resources. This causes destruction, depletion and pollution. This has led to the development of ecological economics. This field deals with merging the insights of the two paradigms and resolve their differences. Microeconomics seeks to understand why a market has failed to deliver satisfactory results. It then explains theoretical conditions that are necessary for achievement of perfect competition. When a market has failed, its standard economic assumptions have been undermined. Causes for this include, negative externalities which makes social cost of production to surpass private cost. An example is effects of pollution. On the other hand, positive externalities cause social benefits of consumption to be higher than the private benefit. Imperfect information leads to over-production of demerit goods and under-production of merit goods. Underproduction and high prices can result from dominance by monopolies in the market. Incomplete market occurs where buyers and sellers are not fully aware of the other person’s position regarding product price hence prices may not reflect the true value for the product. Production inefficiency results from factor immobility which causes unemployment. Its competitive advantage is below the expectations of the society (Garegnani, 2006). Market failure results in allocative inefficiency. This is where there is resource misallocation and production of products that are not needed by customers at that time. It is an issue because these resources could have been utilized to make products that meet customer needs. It also causes production inefficiency. This is where given inputs are put in place but the outputs are