(a) Theory of Product Pricing : The price of each commodity is determined by the forces of demand and supply. Micro economics is a study of demand analysis i.e. individual consumer behaviour and supply analysis i.e. individual producer behaviour.
(b) Theory of Factor Pricing : There are four main factors contributing to the production process which are land, labour, capital and entrepreneur. Micro economics helps in determining the factor rewards like land gets rent, labour gets wages, capital gets interest and entrepreneur gets profit.
(c) Theory of Economic Welfare : This theory deals with efficiency in allocation of resources which aim at maximum satisfaction of people.
Three economic efficiencies are as follows :
- Efficiency in production: It mean producing the maximum amount of goods and services from a given amount of goods and j services from a given amount of resources.
- Efficiency in consumption: It means distribution of produce goods and services to the society for consumption in such a way to have maximum total satisfaction of people.
- Overall economics efficiency: It means to produce those goods and services which are most desired by the people.
