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Resource allocation refers to the distribution of resources among competing groups. These resources may be natural resources, money, labour, etc., which the producers use in production processes to produce goods. Resource allocation involves making decisions regarding how the resources should be allocated to each group such that they can be utilised in the best possible manner providing maximum gains to the society. The decision regarding resource allocation is particularly important because resources are scarce and also have competing uses. Thus, effort must be made to use them efficiently and optimally

Economic efficiency can be defined as a situation in which welfare of the society is maximised. Microeconomics focuses on utilising scarce resources in a way that the public/social welfare is maximised. Economic efficiency involves attainment of efficiency along the following three aspects.

1. Production efficiency: It refers to producing the maximum amount of output from the available resources. 

2. Consumption efficiency: It refers to distributing the produced goods and services among the various consumers in such a manner that the overall social welfare is maximised. 

3. Overall economic efficiency: It refers to efficiency with regard to the production mix. In other words, it refers to producing that combination of goods and services that provide maximum satisfaction to the people.

Microeconomics is the study of the following theories:

i. Theory of product pricing - The theory of product pricing explains how the prices of goods are determined in the market. For this, it is important to study demand and supply in the market. The demand is studied by studying the consumer behaviour and the supply is studied by studying the cost and production behaviour of the firm. 

ii. Theory of factor pricing - The theory explains how the prices of various factors of production, namely, land, labour, capital and entrepreneur, are determined in the factor market in the form of rent, wages, interest and profits respectively. 

iii. Theory of economic welfare - This theory of microeconomics deals with the allocation of resources. It explains that resources should be used in a manner that gives maximum satisfaction to people. It involves making decisions such as what to produce, how much to produce, when to produce, for whom to produce and by what technique to produce.

Microeconomics refers to the study of individual economic units such as the consumer and the producer. The following are the features of microeconomics.

i. Individual units - Microeconomics is a study of behaviour of individual units in an economy such as an individual consumer and producer. 

ii. Price theory - Microeconomics is also called the price theory, as it helps in determining the prices of both the commodities and factors of production in their respective markets. 

iii. Slicing method - Microeconomic analysis adopts the slicing method wherein, the entire economy is divided into various smaller units and then each unit is analysed individually in detail. 

iv. Partial equilibrium - Microeconomics uses a partial equilibrium approach. Herein, each of the units is studied in isolation assuming the effect of the other units as constant. It ignores the interdependence among the various units. 

v. Microscopic approach - Just as a microscope enables us to see a larger view of smaller things, microeconomics shows a magnified view of an individual unit. It analyses small units in detail. It examines how these individual units perform economic activities and reach equilibrium.

Marginalism principle focuses on studying the change in total amount when one additional unit is added to it. This additional unit is called the marginal unit. All microeconomic decisions are based on this concept.

Microeconomic theories are based on assumptions such as full employment, perfect competition, a laissez-faire style of working (no government intervention) and ceteris paribus. These assumptions help in understanding the relationship between any two variables. However, these assumptions may or may not exist in the real world.

The following are the features of microeconomics.

i. Individual units - Microeconomics is a study that basically focuses on the behaviour of individual units such as an individual consumer and producer. 

ii. Price theory - Microeconomics is also called the price theory, as it helps in determining the prices of both the commodities and factors of production in their respective markets. 

iii. Slicing method - Microeconomic analysis adopts the slicing method. Under this method, the entire economy is divided into smaller units and then each unit is analysed individually in detail. 

iv. Partial equilibrium - Microeconomics uses a partial equilibrium approach. The equilibrium points are identified assuming “other things remain constant” (ceteris paribus). It ignores the interdependence of economic variables. 

v. Microscopic approach - Just as a microscope enables us to see a larger view of smaller things, microeconomics shows a magnified view of an individual unit. It analyses small units in detail. It examines how these individual units perform economic activities and reach equilibrium. 

vi. Marginalism principle: Marginal means change in the total due to an additional unit. The additional unit is known as the marginal unit. Microeconomics is based on the principle of marginalism as important economic decisions are based on the marginal unit. 

vii. Analysis of market: Microeconomic studies deals in the study of different market structure namely, perfect competition, monopoly, monopolistic competition, oligopoly. It analyses how prices and ouput are determined in the market. 

viii. Based on assumptions: Microeconomic analysis is based on certain assumptions such as laissez faire, full employment, perfect competition, ceteris paribus, etc. Such assumptions although make the analysis simple, but may not exists in reality.

Micro Economics is known as income theory - False

No, microeconomics is not known as the income theory, rather ,it is known as the price theory, as it focuses on determining the prices of commodities and factors of production in the market.

Micro Economics studies behaviour of individual unit - True 

Yes, microeconomics is a study that basically focuses on the behaviour of an individual units in the economy such as consumer and producer.

Microeconomics deals with the following questions:

i. What goods are to be produced and in what quantities? - This question deals with the types of goods that are to be produced by the firm and the quantity in which they are to be produced. 

ii. Who will produce them and how? - After taking the decision on the type of goods to be produced, the firm must decide upon the technique (labour-intensive or capital-intensive) required to produce those goods. 

iii. To whom & how the wealth, so produced, shall be distributed? - This question is concerned with the distribution of income or wealth and the channel through which this wealth is to be distributed. 

iv. How resources are to be allocated to ensure production and consumption in an efficient manner? - Efficient allocation of resources means distribution of resources in a manner such that they reach the individual or group who values it the most.

True

Microeconomics studies the behaviour of individual units. Accordingly, a firm being an individual unit, its behaviour is studied under microeconomics. Microeconomics studies prices of commodities and factors of production in both the consumer and factor markets.

Micro Economics is a Partial equilibrium approach.

In microeconomics each of the individual units is studied in isolation. That is, while studying one unit/variable the effect of other units or variables is taken to be constant. It ignores the interdependence of economic variables. In other words, it is based on the assumption of “other things remain constant” (ceteris paribus). Thus, because of this assumption, it is said that microeconomics has a partial equilibrium approach.

Explanation:

1) Adam Smith is regarded as the Father of Economics. He is the founder of Microeconomics. In his book ‘The Wealth of Nations’, published in the year 1776, he has mentioned how the prices of commodities and factors of production are fixed. 

2) In microeconomics, we study the behaviour of individual economic units, basically consumers and firms. 

3) In macroeconomics, we study the economy as a whole. It focuses on the aggregate measures such as aggregate demand, aggregate supply and aggregate price level. 

4) The principles of economics were propounded by a well-known neoclassical economist Dr. Alfred Marshall in 1890.

False

Adam Smith is known as the Father of Economics, as he is the founder of microeconomics. On the other hand, Dr. Marshall is a neo-classical economist who developed the Principles of Economics.