The Components of the Economy

Microeconomics explains the basis and laws of preference formation (decisions) in individuals. The formed preferences are the basis of the economic actions taken. Microeconomics explains how and why certain preferences arise and what economic actions they then trigger. The actions of individuals have direct and indirect consequences. Through repetition of decisions and actions, behaviors and patterns of action are formed. This is also how economic processes arise, such as production, supply, demand, consumption, market, or stock exchange.